Q1 2025 Tecsys Inc Earnings Call

September 6, 2024

Speaker Change: Good morning, everyone. Welcome to Texas First Quarter fiscal year 2025 Result Conference Call.

Operator: 2020-25 Results Conference Call. Please note that the complete first quarter report, including MD&A and financial statements, were filed on Cedar Plus after market closed 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 the website at www.tecsys.com forward 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, police, and assumptions. Actual results may differ materially from such statements.

Speaker Change: Please note that the complete first quarter report, including MD and A, and financial statements, were filed on CDR plus after Mark closed yesterday. All dollar amounts are expressed in Canadian currency and are prepared in accordance with international financial reporting standards.

Speaker Change: The company has added a companion presentation to today's call, which is available on the website at www.texas.com, forward slash investors.

Speaker Change: Some of the statements in this conference call, including the question answer period, may include forward-looking statements that are based on management, beliefs and assumptions. Actual results may differ materialially from such statements.

Operator: I would like to remind everyone that this call is being recorded on Friday, September 6, 2024, at 8:30 a.m. Eastern time.

Speaker Change: I would like to remind everyone that this calls be recorded on Friday September 6, 2024 at 8.30 a.m. Eastern Time. I would not like to turn the conference over to Mr. Peter Brereton, Chief Executive Officer at Texas. Please go ahead, sir.

Operator: I would now like to turn the conference over to Mr. Peter Brereton, Chief Executive Officer at Texas. Please go ahead, sir.

Peter Brereton: Thank you.

Peter Brereton: Good morning, everyone. Joining me today is Mark Butler, our Chief Financial Officer. We appreciate you joining us for today's call. As many of you have likely seen in the results issued last night, our company began fiscal 25 with another solid quarter led by strong SaaS revenue and bookings performance across market segments. With year-over-year SaaS revenue up 33%, and SaaS bookings up 57%, our momentum continues across the board. Our differentiation is clear. We are strategically positioned for growth, and our team is dedicated to delivering leading-edge solutions with a relentless focus on customer success.

Peter Brereton: Thank you. Good morning everyone. Doing me today is Mark Bentler, our Chief Financial Officer. We appreciate you joining us for today's call.

Speaker Change: Park. As many of you have likely seen in the results issued last night, our company began fiscal 25 with another solid order led by strong SaaS revenue and bookings performance across market segments.

Speaker Change: with year over year, that's Saturday, revenue up 33% and Saturday's bookings up 57% are momentum continues across the board.

Speaker Change: Our differentiation is clear, we are strategically positioned for growth on our team that's dedicated to delivering leading edge solutions with a relentless focus on customer success.

Peter Brereton: I would like to take a moment to summarize the key events of our Q1 results for fiscal 25. Mark will then walk us through the financial results in more detail. And finally, I will comment on our look, followed by a Q&A session. If you're following along on our companion presentation, I'll be speaking to slide three. In Q1, we delivered solid performance with 3 million SaaS bookings, up 57% year-over-year, driven by a broad participation across our key verticals. We secured a major healthcare migration with one of the largest IDNs in North America, representing over 100 hospitals, which I'm calling out to highlight the significant scale and white space penetration potential of each new deal.

Speaker Change: I would like to take a moment to summarize the key events of our Q1 results for fiscal 25. Mark will then walk us through the financial results in more detail and finally I will comment on our look followed by a QA session.

Mark Bentler: If you're following along on our companion presentation, I'll be speaking to slide three.

Speaker Change: In Q1, we delivered solid performance with 3 million SaaS bookings, up 57% year over year, driven by a broad participation across our key verticals. We secured a major healthcare migration with one of the largest ideas in North America, representing over 100 hospitals.

Speaker Change: which I'm calling out to highlight the significant scale and weight space penetration potential of each new deal. We also saw another pharmacy expansion deal. Reinforcing our continued progress and growth opportunity in the pharmacy sector as discussed in previous quarter.

Peter Brereton: We also saw another pharmacy expansion deal, reinforcing our continued progress and growth opportunity in the pharmacy sector, as discussed in previous court. Contributions from general distribution include a new logo, a new cloud migration, and a competitive windback, reinforcing our position as the top choice for those investing in a modern supply chain solution, whether they're new, existing, or returning customers. On the SaaS and services side of the business, we are properly resourced for our guidance and growth, reinforced by a robust backlog. Our RPL is up 40% year-over-year, reflecting steady bookings and renewals. Adjusted EBITDA remains strong at 2.6 million.

Speaker Change: Contributions from General Distribution include a new logo, an implied migration, and a competitive windback reinforcing our position as the top choice for those investing in a modern supply chain solution, whether they're new existing or returning customers.

Speaker Change: On the SaaS and service side of the business, we are properly resourced for our guidance and growth, reinforced by a robust backlog. Our RPL is up 40% year-over-year reflecting steady-bookings and renal.

Peter Brereton: Additionally, we continue to buy back shares under our normal course issue of bid, spending 2.2 million on share buybacks in Q1. The opportunity to expand within existing accounts is increasing across all our verticals as we continue to build upsell and cross-sell value propositions. And refine how we deliver that value through product innovation featured in function. As I've shared previously, this is a particularly, or sorry, this is particularly true in healthcare, where we often start by addressing a single entry point, prove both the value and expand across an entire organization. This is an important growth drive refresh, with inroads into pharmacy serving as a key example.

Speaker Change: Adjusted Eva Divermeen Strong at 2.6 million. Additionally, we continue to buy back shares under our normal course issue of bid, spending 2.2 million on share buybacks in Q1.

Speaker Change: The opportunity to expand within existing accounts is increasing across all our verticals as we continue to build upsell and cross-sell value propositions and refine how we deliver that value through product innovation, features and functions.

Speaker Change: As I've shared previously, this is a particularly, or sorry, this is particularly true in healthcare, where we often start by addressing a single entry point, prove both the value and expand across an entire organization.

Speaker Change: This is an important growth driver for us, with the inrology and depharmacy serving as a key example.

Peter Brereton: We continue to experience traction in the pharmacy supply chain, with a growing interest in the consolidated pharmacy service center, or CPSC. This provides a centralized distribution model, similar to what we do in hospital general supplies, adapted for pharmacy. This quarter, we secured an add-on project at the University of North Carolina Health. With the U.S. D.S. CSA compliance legislation coming into effect this November, recently released customer stories from Texas Children's Hospital and Baptist Health, and half a dozen IDNs now on board. We are well positioned to build on this early momentum, as the market solution within an industry, where we already have a solid position.

Speaker Change: We continue to experience traction in the pharmacy supply chain with a growing interest in the consolidated pharmacy service center or CPSC. This provides a centralized distribution model similar to what we do in hospital general supplies adapted for pharmacy.

Speaker Change: This quarter we secured an ad on project at University of North Carolina Health.

Speaker Change: With the US, the SCSA compliance legislation coming into effect this November.

Speaker Change: Recently released customer stories from Texas Children in Tossville and Baptist Health, and half a dozen IDNs now on board. We are well positioned to build on this early momentum as the market solution within an industry where we already have a solid position.

Peter Brereton: We're also accelerating our market access with a partner ecosystem that is stronger than ever. For example, you may have seen some co-marketing with Turso, Trace-Linke, and Rise Now, which highlights our differentiated position in key areas, like the FCSA and pharmacy. This type of market engagement, not to mention newly certified technology integrations, and ongoing go-to-market collaborations, continues to play an important role in product and pipeline development. This effort is improving valuable, with a vote of third of our deals being partner influenced over the last 12 months. Whether directly with Texas or via partners, we are solidifying our position as the system of choice for organizing organizations grappling with supply chain complexity.

Speaker Change: We're also accelerating out market access with a partner ecosystem that is stronger than ever. For example, you may have seen some co-marketing with TURSO trace length and rise now, which highlights our differentiated position in key areas like the FCSA and pharmacy.

Speaker Change: This type of marketing engagement not to mention newly certified technology integrations and ongoing go-to-market collaborations continues to play an important role in product and pipeline development.

Speaker Change: This effort is proven valuable with a boat of third of our deals being partner-influenced over the last 12 months.

Speaker Change: Weather Directly with Texas, or via partners, we are solidifying our position as the system of choice for organizing, organizations grappling with supply chain complexity.

Peter Brereton: To cement that position, we are hyper-focused on customer sat. Last quarter, I emphasized the importance of customer success as we scale. As our base grows, markets diversify and partner ecosystems develop, that effort is taking shape in the form of higher levels of customer service. We're actively evolving customers in value-added activities like user groups, industry workshops, and proactive customer checkpoints. This ongoing effort is already reflected in positive NPS movement, and it will continue to drive our business strategy moving forward. Part of that customer success is looking for new ways to deliver value to them.

Speaker Change: Thank you for watching!

Speaker Change: To cement that position we are hyper focused on customer set.

Speaker Change: Last quarter, I emphasize the importance of customer success as we scale. As our base grows, markets diversify and partner ecosystems develop.

Speaker Change: That effort is taking shape in the form of higher levels of customer service. We're actively evolving customers and value added activities like user groups, industry workshops, and proactive customer checkpoints.

Speaker Change: This ongoing effort is already reflected in positive NPS movement and it will continue to drive our business strategy moving forward.

Speaker Change: Keep that in mind.

Speaker Change: Part of that customer success is looking for new ways to deliver value to them. In July, we announced the appointment of Rex Alstrom as Chief Strategy Officer. Tapping into his 25 years of experience, Rex will drive global initiatives to maximize the value of Texas evolving SaaS offerings and data capabilities.

Peter Brereton: In July, we announced the appointment of Rex Alstrom as Chief Strategy Officer. Tapping into is 25 years of experience, Rex will drive global initiatives to maximize the value of Texas-evolving SaaS offerings and data capabilities. His expertise in digital transformation and innovation aligns perfectly with Texas' vision, further positioning us to capitalize on market opportunities and enhance customer value.

Rex Alstrom: He's expertise in digital transformation and innovation aligns perfectly with Texas vision for their positioning as to capitalize on market opportunities and enhanced customer value.

Peter Brereton: We've also added depth to our board with two new directors voted in at yesterday's shareholder meeting, Stephanie Verstrate and St. Priya Senegar. Stephanie is Chief Marketing Officer at Teladoc Health and has had leadership roles at Expedia and PepsiCo. She brings expertise in M&A, brand building, and performance marketing. Priya has extensive experience leading global teams in product and data engineering and platform development at organizations including Olo, Manhattan Associates, and Bank of America. We're enthusiastic about the significant impact they will bring to the board.

Speaker Change: We've also had a depth to our board with two new directors voted in at yesterday's shareholders meeting. Stephanie, Virstrait and the Street Priya of Senagar. Stephanie is...

Speaker Change: Chief Marketing Officer at Teladoc Help and has had leadership roles of Expedia and Pepsi Co.

Speaker Change: She brings expertise in emanating brand building and performance marketing.

Speaker Change: Preya has extensive experience leading global teams in product and data engineering and platform development that organizations including Olo Manhattan Associates and Bank of America. We're enthusiastic about the significant impact they will bring to the board.

Peter Brereton: In more company news, in July, Texas was named a 2024 Great Place to Work in Canada, the US, and Denmark. This recognition not only speaks to the culture we've built around the world, which we're very proud of, it's also about what it means for our customers. Happy engaged employees lead to better customer service and higher customer success rates. As we grow our team and capacity, this achievement reinforces our belief that a strong internal culture directly contributes to the quality of service, value, and innovation we deliver to our customers every day. And so, as we continue to invest in the products we sell and our go-to-market strategy, Texas is proven to be among the best cloud-based solutions available in the markets we serve.

Speaker Change: In more company news, in July, Texas was named a 2024 Greek place to work in Canada, the U.S. and Denmark.

Speaker Change: This recognition not only speaks to the culture we've built around the world which we're very proud of. It's also about what it means to our customers. Happy engaged employees lead the better customer service and higher customer success rates.

Speaker Change: As we grow our team and capacity, this achievement reinforces our belief that a strong internal culture directly contributes to the quality of service, value and innovation we deliver to our customers every day.

Speaker Change: and so, as we continue to invest in the products we sell and our Gold Market strategy, Texas is proven to be among the best cloud-based solutions available in the markets we serve.

Peter Brereton: The steady growth we've experienced affirms our vision and strategy for shareholder value.

Speaker Change: The steady growth we have experienced affirms our vision and strategy for shareholder value. Mark will now provide further details on our first quarter financial results, as well as financial guidance on several key metrics.

Mark Butler: Mark will now provide further details on our first quarter financial results, as well as financial guidance on several key metrics.

Mark Butler: Thank you, Peter. We're pleased with the performance in our first fiscal quarter ended July 31st, 2024. I'll start with slide four and focus first on fast. SASS continues to be the key driver for our growth, and we believe the key driver for value creation. SASS revenue growth is driving our recurring revenue, and during the first quarter, SASS revenue growth was 33%, reaching $15.3 million. As Peter mentioned previously, our SASS bookings were up 57% to $3 million in the quarter. Our higher growth SASS revenue has now overtaken professional services revenue as our largest single source of revenue, and we expect this to continue to play out in fiscal 2025 and beyond.

Mark Bentler: Thank you, Peter. We're pleased with the performance in our first fiscal quarter ended July 31, 2024. I'll start with slide four and focus first on fast. Sass continues to be the key driver for our growth and we believe the key driver for value creation.

Mark Bentler: SAS Revenue Growth is driving our recurring revenue, and during the first quarter, SAS Revenue Growth was 33% reaching $15.3 million.

Mark Bentler: As Peter mentioned previously, our SaaS bookings were up 57% to 3 million in the quarter.

Mark Bentler: Our higher growth SaaS revenue has now overtaken professional services revenue as our largest single source of revenue and we expect this to continue to play out in fiscal 2025 and beyond.

Mark Butler: Total revenue for the quarter reached $42.3 million, representing a 1% increase compared to the same period last year. It's important to note that when hardware revenue is excluded, the growth rate jumps to 9%. The strong underlying growth in SASS revenue is somewhat muted here by year-over-year fluctuations in both professional services and hardware. Our primary focus remains on driving consistent growth in our SASS revenue stream, and we're not concerned about the variability in professional services and hardware components of the business. Professional services revenue for the first quarter was $13.4 million. That was down 10% from $14.9 million reported for the same quarter last year and down from $14.4 million sequentially compared to Q4.

Speaker Change: Total revenue for the quarter reached 42.3 million representing a 1% increase compared to the same period last year.

Speaker Change: It's important to note that when hardware revenue is excluded, the go-thrate jumps to 9%.

Speaker Change: The strong underlying growth in SAS revenue is someone muted here by year-over-year fluctuations in both professional services and hardware.

Speaker Change: Our primary focus remains on driving consistent growth in our core SaaS revenue stream. And we're not concerned about the variability in professional services and hardware components of the business.

Speaker Change: Professional Services Revenue for the first quarter was 13.4 million. That was down 10% from 14.9 million reported for the same quarter last year.

Speaker Change: and down from 14.4 million sequentially compared to Q4.

Mark Butler: As noted in our MDNA, the timing of professional services revenue is affected by project delivery schedules, which can be outside of our control. Recent quarters have demonstrated that we're staff to deliver more than $14 million of professional services revenue per quarter, and based on our current backlog and visibility in the project timelines, we expect to return to this level. Supporting this, we had the strong professional services bookings in Q1 at $17.2 million, and that was up 25% compared to the same period last year. We expect professional services revenue will continue to fluctuate based on the balance of integration partner involvement and project delivery time.

Speaker Change: As noted in our MDNA, the timing and professional services revenue is affected by project delivery schedules, which can be outside of our control.

Speaker Change: Reaching quarters have demonstrated that we're staffed to deliver more than $14 million of professional services revenue per quarter and based on our current backlog and visibility in a project timelines, we expect to return to this level.

Speaker Change: Supporting this, we had strong professional services bookings in Q1 at $17.2 million dollars, and that was up 25% compared to the same period last year.

Speaker Change: We expect professional services revenue will continue to fluctuate, based on the balance of integration partner involvement and project delivery timing.

Mark Butler: For the first quarter of fiscal 2025, gross margin was 47% compared to 46% in the same period last year. Combined Sath's maintenance, support, and professional services gross margin for the three months ended July 31st, 2024, was 49%. That was down compared to 50% in the same period last year. The impact of increasing SASS margins in the first quarter of fiscal 2025, which by the way continued to track as planned, was offset by the impact of reduced professional service margins in the current quarter. We're very happy with the continued positive trajectory in our SASS margin profile.

Speaker Change: For the first quarter of fiscal 2025, margin was 47%, compared to 46% in the same period last year.

Speaker Change: Combined SaaS, maintenance, support, and professional services gross margin for the 3 months ended July 31, 2024, was 49%. And that was down compared to 50% in the same period last year.

Speaker Change: The impact of increasing mass margins in the first quarter fiscal 2025, which by the way continued to track as planned, was offset by the impact of reduced professional service margins in the current quarter.

Speaker Change: We're very happy with the continued positive trajectory in our SAS margin profile.

Mark Butler: Net profit in the quarter was down about $400,000 to $798,000 compared to 1.2 million in the same quarter last year. Adjusted EBITDA was 2.6 million in Q1 Fiscal 2025 compared to 3.2 million same period last year. We ended Q1 Fiscal 25 with a solid balance sheet. We had cash in short-term investments of $27.1 million and no debt. As Peter mentioned, we used $2.2 million of cash in the quarter to buy back shares under our normal course issue or bid. Additionally, the board yesterday approved a quarterly dividend of eight cents a share.

Speaker Change: Net profit in the quarter was down about $400,000 to $798,000.

Speaker Change: Compared to 1.2 million in the same quarter last year.

Speaker Change: The Justice Unit was 2.6 million in Q1 fiscal 2025 compared to 3.2 million, same period last year.

Speaker Change: We ended Q1 fiscal 25 with the solid balance sheet. We had cash and short-term investments of $27.1 million and no debt.

Speaker Change: As Peter mentioned, we use $2.2 million in cash in the quarter to buy back shares, and there are normal, of course, issuer bid, and additionally, the board yesterday approved a quarterly dividend of 810 to share.

Mark Butler: With respect to financial guidance and moving now to slide five, we are reiterating full year 25 guidance as follows. Total revenue growth between seven and nine percent. SaaS revenue growth between 30 and 32 percent and adjusted EBITDA margin between eight and nine percent. Additionally, we're reiterating adjusted EBITDA margin guidance for fiscal 2026 of between 10 and 11 percent.

Peter Brereton: With respect to financial guidance and moving now to slide five, we are reiterating full year 25 guidance as follows.

Peter Brereton: Total revenue growth between 7 and 9%.

Speaker Change: Sass revenue growth between 30 and 32%.

Speaker Change: and adjusted EBITDA margin between 8 and 9%.

Speaker Change: Additionally, we're reiterating adjusted EBITDA margin guidance for fiscal 2026 of between 10 and 11%.

Peter Brereton: I'll now turn the call back to Peter to provide some outlook comments. Thanks, Mark. Texas kicked out fiscal 25 with solid performance, building on the strong momentum from last year. Our balance sheet remained strong, supported by a healthy backlog and sales pipeline. We are seeing widespread buyer intent across target markets with opportunity cycles accelerated by a highly capable sales team with the tools, talent, and strategic partners to capitalize on a market ready to invest. As mentioned earlier, our existing footprint in key markets reinforces our confidence that we are well positioned to upsell and cross out, with health care and pharmacy by extension serving as an important growth engine for us.

Speaker Change: I'll now turn the call back to Peter to provide some outlook comments.

Speaker Change: The End of Episode 2

Peter Brereton: Thanks Mark.

Peter Brereton: Texas kicked off fiscal 25 with solid performance building on the strong momentum from last year. Our balance sheet remained strong, supported by a healthy backlog and sales pipeline.

Peter Brereton: We are seeing widespread buyer intent across target markets with opportunity cycles accelerated by a highly capable sales team with the tools, talent, and strategic partners to capitalize on a market ready to invest.

Peter Brereton: is mentioned earlier, existing footprint in key markets reinforces our confidence that we are well positioned to upsell and cross-sell with healthcare and pharmacy by extension, serving as an important growth engine for us.

Peter Brereton: Our value proposition pharmacy is compelling, and we see no signs of this slowing down. Over and above our IDN business with the added pharmacy white space, we are seeing growth signs in our medical and pharma distribution sector driven partially by that DSESA legislative pressure mentioned earlier. I should mention DSESA is the Drug Supply Chain Security Act. It requires traceability with that Texas solutions enable. Our converging and general distribution business also represents a substantial market opportunity. We are well positioned to pursue new marketplaces and geographies within this space. We will continue to invest to drive our growth alongside a market that is changing.

Peter Brereton: Our value proposition in pharmacy is compelling and we see no signs of this slowing down.

Peter Brereton: Over and above our IDN business with the added pharmacy-white space, we are seeing growth signs in our medical and farm and distribution sector driven partially by that the SESA legislative pressure mentioned earlier. I should mention the SESA is the drug supply chain security act.

Peter Brereton: and requires traceability with that Texas solution's angle.

Peter Brereton: Our Converging and General Distribution Business also represents a substantial market opportunity.

Peter Brereton: We are well positioned at pursuing new marketplaces and geographies within this space. We will continue to invest to drive our growth alongside a market that is changing.

Peter Brereton: Changes spurred by aging legacy systems, digital adoption, and a fundamental shift in consumer expectations, which now demand more efficiency, transparency, and responsiveness from. We are pleased that our Q1 results continue to demonstrate our dominance in key markets and emerging opportunity in growth markets. The wave of change in system modernization and supply chain is underway, and businesses are actively investing in the tools they need to adapt to consumer expectations. As we look ahead, we are confident in our ability to seize market opportunity and presence in these rapidly growing markets around the world.

Speaker Change: Change is spurred by aging legacy systems digital adoption and a fundamental shift in consumer expectations, which now demand more efficiency, transparency and responsiveness from supply chains.

Speaker Change: We are pleased that our Q1 results continue to demonstrate our dominance in key markets and emerging opportunity in growth markets. The wave of change in system modernization in supply chain is underway and businesses are actively investing in the tools they need to adopt it.

Speaker Change: and adapt to consumer expectations.

Speaker Change: is. We'll go look ahead, we are confident in our ability to seize market opportunity and presence in these rapidly growing markets around the world. And so in summary, I want to remind analysts and investors of our key themes for fiscal 25.

Peter Brereton: And so, in summary, I want to remind analysts and investors of our key themes for fiscal 25. First, an emphasis on continuing to refine our SaaS software so it is easy to use, an upgrade, and even easier to recommend appears. 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, we are committed to harnessing the full potential of data to drive value and innovation. Across our solutions, our focus will be on leveraging data to enhance our offerings and generate greater customer value.

Speaker Change: First, an emphasis on continuing to refine our staff's software, so it is easy to use an upgrade and you can use your to recommend appears.

Speaker Change: 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.

Speaker Change: Third, we are committed to harnessing the full potential of data to drive value and innovation.

Speaker Change: are cross-our solutions, our focus will be on leverage and data to enhance our offerings and generate greater customer value.

Peter Brereton: With Rex Ulsterman on board as our chief strategy officer. We are developing a path to advancing our data capabilities and maximizing their impact. As a final point, I'd like to stress across our markets, we'll continue to prioritize customer satisfaction and success. We have long stood by the philosophy of Customers for Life. A big part of that formula is to deliver value quickly, stay connected, and expand on the value delivered.

Rex Ulström: with Rex Ulström on board as our Chief Strategy Officer. We are developing a path to advancing our data capabilities and maximizing their impact.

Rex Ulström: As a final point, I'd like to stress across our markets, we'll continue to prioritize customer satisfaction and success.

Rex Ulström: We have long stood by the philosophy of customers for life. A big part of that formula is to deliver value quickly, stay connected and expand on the value delivered. With that, we will open the call for questions. Thank you.

Operator: With that, we will open the call for questions.

Operator: Thank you.

Operator: Thank you, ladies and gentlemen. We will now begin the question and answer session. Should you have a question, please press star followed by the one on your touchstone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the two.

Speaker Change: Thank you, ladies and gentlemen, we will now begin the question and answer session. Should you have a question please press star follow by the one on your touchstone phone. You will hear prompt that your hand has been raised. Should you wish to decline from the polling process please press star follow by the two. If you are using a speaker phone please lift the hands that before pressing any keys.

Operator: If you are using a speaker phone, please lift the hands up before pressing any keys.

Operator: Your first question comes from Amir. Is that with Ventum Capital Markets?

Speaker Change: Your first question comes from Amir, as that with Bentham Capital Markets, your line is now open.

Amir: Your line is now open.

Amir: Peter, Mark, Good morning. Thanks for taking my question. Can you grasp on the continued expansion into pharma?

Speaker Change: and Peter Mark Goodman and thanks for taking my questions. I'm Mark Brereton.

Mark Brereton: We can wrap on the continued expansion into Pharma. I understand the market is largely greenfield, but I wonder.

Peter Brereton: I understand the market is largely green field, but I wonder, are there any inorganic opportunities to accelerate your penetration, for instance, buying a point-to-lution provider, or another sort of software company, maybe a buy-side software?

Mark Brereton: Are there any inorganic opportunities to accelerate your penetration, for instance, buying a point solution provider or another sort of software company maybe a biceye software?

Peter Brereton: We don't think so.

Peter Brereton: Not that we haven't poked around, but if you say it's so greenfield in terms of this approach to running a completely centralized pharma, the CPSC, that there's really nobody doing it. With the last couple of years, we've now built out the platform to properly manage 340B and properly manage the daily distribution of drugs out to a site. You may have heard me say it before, but some of this just comes down to, for most hospital networks, when somebody checks into a ward, often sort of a weak supply of the drugs they need are sent to them.

Speaker Change: Thank you for watching!

Speaker Change: Well, we don't think so. I mean, not that we haven't cooked around, but as you say, it's so green field in terms of this.

Speaker Change: This approach to sort of running a completely centralized.

Speaker Change: Farm of the CPSC, but there's really nobody doing it, doing it.

Speaker Change: In the last couple of years we've now built out the platform to properly manage 340V and properly manage the daily distribution of drugs out to a site.

Speaker Change: I mean, even you heard me say it before, but like some of it just comes down to, you know, for most hostile networks when, you know, somebody checks into a ward, often sort of a weak supply of the drugs they need are sent to them.

Peter Brereton: Then two days later, it turns out they're already gone, and sort of five days of leftover drug is to sit there and rot on the shelf. With this approach, it's really going to a, you know, not for Tylenol, and I kind of think, but for any of the more expensive drugs. We're literally set up to sort of run that splicing end-to-end and then deliver early morning every day just what's needed that morning. And the savings are astronomical. But nobody else is really doing it.

Speaker Change: and then two days later, it turns out they're already gone and sort of five days of left over drugs to sort of sit there and run on the shelf. So with this approach, it's really going to not for Tylenol and I kind of think, but for any of the more expensive drugs.

Operator: 2025 Results Conference Call. Please note that the complete first quarter report including MD&A and financial statements were filed on Cedar Plus after market calls yesterday. All dollar amounts are expressed in Canadian currency and are prepared in accordance with international financial reporting standards.

Speaker Change: We're literally set up to sort of run that splicing and then deliver early morning, every day, just what's needed that morning.

Operator: The company has added a companion presentation to today's call, which is available on the website at www.tecsys.com forward 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, police and assumptions. Actual results may differ materially from such statements.

Speaker Change: and it's the same as your astronomical. But nobody else is really doing it, so it's a new...

Peter Brereton: So it's a new ground, and I think we just got to build it and sell it.

Speaker Change: New Ground, I think we just got to build it and sell it.

Amir: Fantastic. Then is it like still early days, I guess, to talk about how that could expand your ARR per network? I know you always mention like average ARR per network's like $3 million and obviously not all networks will have pharma as a target.

Speaker Change: is fantastic. Is it still early days, I guess, to talk about how that could expand your ARR per network? I know you always mention like average ARR per network's like $3 million.

Operator: I would like to remind everyone that this call is being recorded on Friday, September 6, 2024 at 8.30 a.m. Eastern time.

Operator: I would like to remind everyone that this call is being recorded on Friday, September 6, 2024, at 8:30 a.m. Eastern time.

Speaker Change: and obviously not all networks will have pharma as a target but can you maybe help us quantify where the ARR might go for networks for pharma as a target?

Operator: I would now like to turn the conference over to Mr. Peter Brereton, Chief Executive Officer at Texas. Please go ahead, sir.

Peter Brereton: I would now like to turn the conference over to Mr. Peter Brereton, Chief Executive Officer at Texas. Please go ahead, sir. Thank you. Good morning, everyone. Joining me today is Mark Butler, our Chief Financial Officer. We appreciate you joining us for today's call. As many of you have likely seen in the results issued last night, our company began fiscal 25 with another solid quarter led by strong SaaS revenue and bookings performance across market segments.

Peter Brereton: But can you maybe help us quantify where the ARR might go for networks worth pharma as a target? Yeah, and we haven't updated our slide on that: the total ARR. But on average, like we're looking across sort of very large networks and medium and smaller networks and so on. And there's a wide variation in terms of how they adopt, how they deploy, etc. But we think, on average, that it had somewhere around a million bucks CAD to the ARR. Fantastic. And that's just for the networks worth Pharma as a target. Right.

Peter Brereton: Thank you.

Speaker Change: Yeah, and we have an update at our slide on that, you know, the total AR, but on average, like we're looking across for the very large networks and medium and so on and out working so on.

Speaker Change: and there's a wide variation in terms of how they adopt, how they deploy, etc. But we think on average that it had somewhere around a million bucks to the air.

Peter Brereton: With year-over-year SaaS revenue up 33 percent and SaaS bookings up 57 percent, our momentum continues across the board. Our differentiation is clear. We are strategically positioned for growth and our team is dedicated to delivering leading-edge solutions with a relentless focus on customer success.

Speaker Change: Fantastic, and that's just for the network's performance at Target for the post-2 right. Hold.

Peter Brereton: One of the things that's interesting with pharma, while we're on the subject, is it spreads across a much wider segment of the market. I mean a lot of what we sell, we only go after networks that have a billion in that patient revenue or more. One of the things we're seeing now is even networks that go down to half a billion in revenue can still get some serious ROI from the pharmacy platform. So it may be the informancy, the number of networks we're pursuing expands as well. That's good color.

Speaker Change: Okay.

Speaker Change: What is interesting with Farmer while we're on the subject is...

Peter Brereton: I would like to take a moment to summarize the key events of our Q1 results for fiscal 25. Mark will then walk us through the financial results in more detail.

Peter Brereton: I would like to take a moment to summarize the key events of our Q1 results for fiscal 25.

Speaker Change: It spreads across a much wider...

Speaker Change: You know, segment of the market. I mean, a lot of what we sell, we only go after networks that have a billion in that patient where having you are more.

Mark Butler: Mark will then walk us through the financial results in more detail.

Peter Brereton: And finally, I will comment on our look, followed by a Q&A session. If you're following along on our companion presentation, I'll be speaking to slide three. In Q1, we delivered solid performance with 3 million SaaS bookings, up 57% year-over-year, driven by a broad participation across our key verticals. We secured a major healthcare migration with one of the largest IDNs in North America, representing over 100 hospitals, which I'm calling out to highlight the significant scale and white space penetration potential of each new deal. We also saw another pharmacy expansion deal, reinforcing our continued progress and growth opportunity in the pharmacy sector, as discussed in previous court.

Peter Brereton: And finally, I will comment on our look followed by a Q&A session. If you're following along on our companion presentation, I'll be speaking to slide three. In Q1, we delivered solid performance with 3 million SaaS bookings up 57 percent year-over-year driven by a broad participation across our key verticals. We secured a major health care migration with one of the largest IDNs in North America, representing over 100 hospitals, which I'm calling out to highlight the significant scale and white space penetration potential of each new deal.

Speaker Change: One of the things we're seeing now is even networks that go down to half a billion in revenue. I can still get some serious ROI from the pharmacy platform. So it may be the new pharmacy, the number of networks we're pursuing expands as well.

Amir: Like regarding your comments on professional services, you know, like nice ethics on the bookings and actually a very nice ethic over the last three quarters. But I just wonder, you know, like with more work being handled by implementation partners, how should we think about professional services revenue longer term? Do we sort of think it stabilizes around like 14, 15 million dollars, or could there be some upside eventually just like big picture? Yeah, I mean, super big picture there, Emma, I think we've hit on this before. We certainly expect that professional services revenue growth will be moderated because of those exact factors that you mentioned, among others.

Speaker Change: Oh, no, no, no, it's good color.

Speaker Change: and Mark regarding your comments on professional services, you know, like nice at-tick on the bookings and actually a very nice at-tick over the last three quarters.

Speaker Change: But I just wonder, you know, like the more work being handled by implementation partners.

Peter Brereton: We also saw another pharmacy expansion deal reinforcing our continued progress and growth opportunity in the pharmacy sector as disgusting previous quarter. Contributions from general distribution include a new logo, a new cloud migration, and a competitive windback reinforcing our position as the top choice for those investing in a modern supply chain solution, whether they're new existing or returning customers. On the SaaS and services side of the business, we are properly resourced for our guidance and growth reinforced by a robust backlog.

Speaker Change: Well, how should we think about professional services revenues longer term? Do we sort of think it stabilizes around like $14, $15 million or could there be some upside eventually just like a big picture?

Peter Brereton: Contributions from general distribution include a new logo, a new cloud migration, and a competitive windback, reinforcing our position as the top choice for those investing in a modern supply chain solution, whether they're new, existing, or returning customers. On the SaaS and services side of the business, we are properly resourced for our guidance and growth, reinforced by a robust backlog. Our RPL is up 40% year-over-year, reflecting steady bookings and renewals. Adjusted EBITDA remains strong at 2.6 million. Additionally, we continue to buy back shares under our normal course issue of bid, spending 2.2 million on share buybacks in Q1.

Speaker Change: Yeah, I mean, super big picture there, and I think we've hit on this before, we certainly expect it.

Speaker Change: Professional Services Revenue Growth will be moderated.

Speaker Change: because of those exact factors that you mentioned among others. You know, that said...

Peter Brereton: You know, that said, we do see some growth there. We don't see it sort of flat lining. The business is going to grow, and we're always going to be playing, you know, we think we're always going to be playing a key role in the real product, product side of our implementation processes, even as more, more broad professional services work in the implementation approach gets covered by service providers. So, you know, we don't see that, you know, in general decline; we don't really see it flat lining. You know, we see it growing. We just see it growing a lot more, obviously a lot less quickly than our understanding growth driver.

Peter Brereton: Our RPL is up 40 percent year-over-year reflecting study bookings and renewals. Adjusted EBITDA remains strong at 2.6 million. Additionally, we continue to buy back shares under our normal course issue of bid, spending 2.2 million on share buybacks in Q1. The opportunity to expand within existing accounts is increasing across all our verticals as we continue to build up sell and cross sell value propositions, and refine how we deliver that value through product innovation featured in function.

Speaker Change: We do see some growth there, we don't see it sort of flatlining, the business is going to grow and we're always going to be playing, you know, we think we're always going to be playing a key role in the real product product side of our implementation processes.

Speaker Change: Eveen as more broad professional services work in the implementation approach.

Peter Brereton: The opportunity to expand within existing accounts is increasing across all our verticals as we continue to build upsell and cross-sell value propositions. And refine how we deliver that value through product innovation featured in function. As I've shared previously, this is a particularly, or sorry, this is particularly true in healthcare, where we often start by addressing a single entry point, prove both the value and expand across an entire organization. This is an important growth drive refresh, with inroads into pharmacy serving as a key example. We continue to experience traction in the pharmacy supply chain, with a growing interest in the consolidated pharmacy service center, or CPSC.

Speaker Change: Get to covered by.

Speaker Change: Service Provider. So, you know, we don't see that, you know, in general decline, we don't really see it flat lining, you know, we see it growing, we just see it growing a lot a lot more obviously a lot less quickly than our, I mean, growth driver.

Peter Brereton: As I've shared previously, this is a particularly, or sorry, this is particularly true in healthcare, where we often start by addressing a single entry point, prove both the value and expand across an entire organization. This is an important growth drive refresh, with inroads into pharmacy serving as a key example. We continue to experience traction in the pharmacy supply chain, with a growing interest in the Consolidated Pharmacy Service Center, or CPSC. This provides a centralized distribution model, similar to what we do in hospital general supplies, adapted for pharmacy.

Amir: So we shouldn't read too much into the revenue line when we see like the bookings go from 9 to 12 to 17 million on professional services. No, I don't think so. I mean, there's, you know, it's about timing and the balance that a bigger backlog creates in terms of managing that, you know, implementation timing and some level of consistency on that delivery. But yeah, I don't think you read that 17 and say, okay, well, that's going to translate if it was 12 last quarter, that's going to pop it, you know, quickly that 5 million is going to pop into the, yeah.

Speaker Change: So we shouldn't read too much into the revenue line when we see the bookings go from 9 to 12 to 17 million on professional purposes.

Speaker Change: No, I don't think so. I mean, it's about timing and the balance that a bigger backlog creates in terms of managing that implementation.

Peter Brereton: This provides a centralized distribution model, similar to what we do in hospital general supplies, adapted for pharmacy. This quarter, we secured an add-on project at the University of North Carolina Health. With the U.S. D.S. CSA compliance legislation coming into effect this November, recently released customer stories from Texas Children's Hospital and Baptist Health, and half a dozen IDNs now on board. We are well positioned to build on this early momentum, as the market solution within an industry, where we already have a solid position. We're also accelerating our market access with a partner ecosystem that is stronger than ever.

Speaker Change: Timing and some level of consistency on that delivery, but yeah, I don't think you read that 17 and say, okay, well, that's going to translate if it was 12 last quarter, that's going to pop it, you know, quickly that 5 million is going to pop it into the, yeah.

Peter Brereton: This quarter, we secured an add-on project at University of North Carolina Health. With the US, DSCSA compliance legislation coming into effect this November, recently released customer stories from Texas Children's Hospital and Baptist Health, and half a dozen IDNs now on board. We are well positioned to build on this early momentum as the market solution within an industry, where we already have a solid position. We're also accelerating out market access with a partner ecosystem that is stronger than ever.

Amir: Fantastic.

Amir: Then maybe one last one on Rex Alstrom joining the company. Two things: like, how did his hiring come about, and can you speak to the specific areas where you expect to see. The immediate impact from your initiative under his leadership. Yeah, I mean, you know, there are guys out there in the market where, when they come available, you just hire them, and you know, Rex is one of those guys that we've known sort of round about in the industry for a number of years. And when we learned he was on the market, we literally just sort of created a position for him.

Speaker Change: and Aztec. Then maybe one last one on Rex Alstrom joining the company. Two things like how did it, how did it, how are we kind of about and can you speak to the specific areas where you expect to see?

Speaker Change: and the immediate impact of new initiatives under his leadership.

Speaker Change: Yeah, I mean, you know, there are guys out there in the market where when they come available, you just hire them.

Peter Brereton: For example, you may have seen some co-marketing with Turso, Trace-Linke, and Ryze now, which highlights our differentiated position in key areas like DSCSA and pharmacy. This type of market engagement, not to mention newly certified technology integrations and ongoing go-to-market collaborations, continues to play an important role in product and pipeline development. This effort is improving valuable, with a vote of third of our deals being partner influenced over the last 12 months. Whether directly with Texas or via partners, we are solidifying our position as the system of choice for organizing organizations grappling with supply chain complexity.

Peter Brereton: For example, you may have seen some co-marketing with Turso, Trace-Linke, and Rise Now, which highlights our differentiated position in key areas, like the FCSA and pharmacy. This type of market engagement, not to mention newly certified technology integrations, and ongoing go-to-market collaborations, continues to play an important role in product and pipeline development. This effort is improving valuable, with a vote of third of our deals being partner influenced over the last 12 months. Whether directly with Texas or via partners, we are solidifying our position as the system of choice for organizing organizations grappling with supply chain complexity.

Speaker Change: and Rex is one of those guys that we've known sort of round about in the industry for a number of years.

Speaker Change: and when we learned he was on the market, we literally just sort of created a position for him.

Peter Brereton: He brings a great deal of experience in basically monetizing data, a combination of using AI, machine learning, et cetera, to create value for clients. And we're now at a point where we've got, you know, we have a massive amount of data residing in our public cloud infrastructure. Some of it, contractually, we're not allowed to use because our, you know, our customers, you know, see it as very private data. So part of what Rex is working on is coming up with a value-added offering where he could go back to those clients and say, okay, you know, if you will give us access to the data, this is how we'll anonymize it.

Speaker Change: He brings a great deal of experience in

Speaker Change: Basically monetizing data.

Speaker Change: Combination of using AI, machine learning, et cetera, to create value for clients. And we're now at a point where we've got...

Speaker Change: You know, we have a massive amount of data residing in our public cloud infrastructure. Some of it can actually, we're not allowed to use because our customers, you know, see it as very private data.

Peter Brereton: To cement that position, we are hyper focused on customer sat. Last quarter, I emphasized the importance of customer success as we scale. As our base grows, markets diversify, and partner ecosystems develop, that effort is taking shape in the form of higher levels of customer service. We're actively evolving customers and value added activities like user groups, industry workshops, and proactive customer checkpoints. This ongoing effort is already reflected in positive NPS movement, and it will continue to drive our business strategy moving forward. Part of that customer success is looking for new ways to deliver value to them.

Rex: So part of what Rex is working on is coming up with a value added offering.

Rex: where he could go back to those clients and say, okay.

Peter Brereton: This is how we'll make sure that it, you know, the names and private information remains private, but this is the value you're going to get out of it. And we think there's a very compelling offering to take to our clients. You know, some of the stuff we were already working on, I mean, we've got a release coming out in October that is going to be using, you know, machine learning to present to a, you know, a BPS supply chain or an SVP supply chain. So literally, sort of what are the five metrics he needs to worry about today.

Rex: You know, if you will give us access to the data, this is how we'll anonymize it, this is how we'll make sure that it, you know, that.

Speaker Change: The names and private information remains private, but this is the value you're going to get out of it. And we think there's a very compelling offering to take to our clients.

Speaker Change: You know, some of the stuff we were already working on, I mean we've got a release coming out in October.

Speaker Change: that is going to be using machine learning to present to a BPS supply chain or an SVPS supply chain, literally sort of what are the five metrics you need to worry about today.

Peter Brereton: In July, we announced the appointment of Rex Alstrom as chief strategy officer. Tapping into is a 25 years of experience Rex will drive global initiatives to maximize the value of Texas evolving SaaS offerings and data capabilities. His expertise in digital transformation and innovation aligns perfectly with Texas vision, further positioning us to capitalize on market opportunities and enhance customer value.

Peter Brereton: So, you know, out of 60 or 70 metrics, it's going to be analyzing the whole network and sort of presenting him when he logs in in the morning with sort of, okay, forget the other 75. These are the five that you need to sweat about today. But there's a lot more we can do there. And so, you know, Rex is sort of learning architecture, learning our market, and then putting together a strategy to take advantage of all that.

Speaker Change: So out of 60 or 70 metrics, it's going to be analyzing the whole network and sort of presenting them when you log in in the morning with sort of okay forget the other 75, these are the five that you need to sweat about today.

Mark: Mark, but there's a lot more we can do there, and so, you know, Rex is sort of learning our architecture, learning our market, and then putting together a strategy to take advantage of all that.

Peter Brereton: We've also added depth to our board with two new directors voted in at yesterday's shareholder meeting, Stephanie Verstrate and St. Priya Senegar. Stephanie is chief marketing officer at Teladoc Health and has had leadership roles at Expedia and PepsiCo. She brings expertise in M&A brand building and performance marketing. Priya has extensive experience leading global teams in product and data engineering and platform development at organizations including Olo, Manhattan Associates, and Bank of America. We're enthusiastic about the significant impact they will bring to the board.

Amir: Fantastic.

Amir: Congrats. Thanks.

Mark: Stuntastic, congrats off that for Mike.

Gavin Fairweather: Your next question comes from Gavin. Bear with it with core market.

Mark: Thanks.

Mark: Thanks. Your next question comes from Gavin, bear with it with Kormark. Your line is now open. Oh, hey, good morning. Thanks for taking my questions. Maybe just to start on the distribution.

Gavin Fairweather: Your line is now open.

Gavin Fairweather: Oh, hey, good morning. Thanks for taking my questions. Maybe just to start on the distribution business, given the green shoots that you've been seeing in the shifting competitive environment. I know you're putting in a few more marketing dollars to generate top-of-funnel. Curious if that's really begun, is that ramping up? Ben Andrews seeing response to the pipeline. Yeah, we're happy with what we're seeing there so far. You know, I mean, even data, new account in that market in the summer quarter. Summer quarter is usually pretty slow, but you know, we already added a new account in that market in the summer quarter, and we've last several quarters we've added a new account in that market of recorder.

Gavin: and Business Given the Green Chutes that you've been seeing in the shifting competitive environment, I know you're planning on putting in a few more marketing dollars to generate top of funnel curses if that's really begun, is that ramping up and are you seeing response in the pipeline?

Peter Brereton: We're enthusiastic about the significant impact they will bring to the board.

Speaker Change: Yeah, we're happy with what we're seeing there so far, you know, I mean, even data new account in that market in the summer quarter, summer quarters usually pretty slow, but you know, we already added a new account in that market.

Peter Brereton: In more company news, in July, Texas was named a 2024 great place to work in Canada, the US, and Denmark. This recognition not only speaks to the culture we've built around the world, which we're very proud of. It's also about what it means for our customers. Happy engaged employees lead to better customer service and higher customer success rates. As we grow our team and capacity, this achievement reinforces our belief that a strong internal culture directly contributes to the quality of service, value, and innovation we deliver to our customers every day.

Peter Brereton: In more company news, in July, Texas was named a 2024 Great Place to Work in Canada, the US, and Denmark. This recognition not only speaks to the culture we've built around the world, which we're very proud of, it's also about what it means for our customers. Happy engaged employees lead to the better customer service and higher customer success rates. As we grow our team and capacity, this achievement reinforces our belief that a strong internal culture directly contributes to the quality of service, value, and innovation we deliver to our customers every day. And so, as we continue to invest in the products we sell and our go-to-market strategy, Texas is proven to be among the best cloud-based solutions available in the markets we serve.

Speaker Change: in the summer quarter, and we've, last several quarters, we've added a new account of that market every quarter.

Peter Brereton: The competitive winback we mentioned too was pretty interesting because that was one where it was a client that had been on an old acquired platform that we had company that we acquired back in, I think, 2003. They've been running that platform for years, and you know, a couple of years ago, they decided it was time to modernize, so they went to market, looked at our newer offerings, looked at some of our competitors' newer offerings, and decided to make a change. They've, as they got to know our competitors' offering in more detail, they end up deciding to shoot the project and come back and sign with us.

Speaker Change: I hope...

Speaker Change: The competitive winback we mentioned too was pretty interesting because that was one where it was a client that had been on an old acquired platform that we had accompanied, we acquired back in I think 2003.

Speaker Change: They've been running that platform for years and a couple years ago they decided it was time to modernize So they went to market, looked at our new offerings, looked at some of our competitors, new offerings, and decided to make a change

Peter Brereton: And so, as we continue to invest in the products we sell, and our go-to-market strategy, Texas is proven to be among the best cloud-based solutions available in the markets we serve. The steady growth we've experienced affirms our vision and strategy for shareholder value.

Speaker Change: and they've got to know our competitors offering in more detail. They end up deciding to shoot the project and come back and sign with us. So, you know, we love those kinds of stories. And so far I would say in the last three, four years we've had...

Peter Brereton: The steady growth we've experienced affirms our vision and strategy for shareholder value.

Peter Brereton: So, you know, we love those kinds of stories, and so far, I would say in the last three, four years, we've had probably five or six of those of people that it's it. They tend to happen especially if companies have grown substantially. You know, they first signed with us when they were a $50 million business and now they're a $700 million business. I think, you know, it's time to go with one of the bigger vendors. And you know, after investing a lot of effort and, in some cases, a lot of money, they end up realizing that, you know, these bigger renders are not really optimized for a high volume efficient supply chain, and so we end up winning the back.

Mark Butler: Mark will now provide further details on our first quarter financial results, as well as financial guidance on several key metrics. Thank you, Peter. We're pleased with the performance in our first fiscal quarter ended July 31st, 2024.

Speaker Change: Probably five or six of those of people that it's, it tends to happen, especially if companies have grown substantially, you know, they first signed with it's when they were a $50 million business and now there are $700 million business and I think, you know, it's time to go with one of the bigger vendors.

Mark Butler: I'll start with slide four and focused first on fast. SAS continues to be the key driver for our growth, and we believe the key driver for value creation. SAS revenue growth is driving our recurring revenue, and during the first quarter, SAS revenue growth was 33%, reaching $15.3 million. As Peter mentioned previously, our SAS bookings were up 57% to $3 million in the quarter. Our higher growth, SAS revenue, has now overtaken professional services revenue as our largest single source of revenue, and we expect this to continue to play out in fiscal 2025 and beyond.

Mark Butler: I'll start with slide four and focus first on fast. SASS continues to be the key driver for our growth, and we believe the key driver for value creation. SASS revenue growth is driving our recurring revenue, and during the first quarter, SASS revenue growth was 33%, reaching $15.3 million. As Peter mentioned previously, our SASS bookings were up 57% to $3 million in the quarter. Our higher growth SASS revenue has now overtaken professional services revenue as our largest single source of revenue, and we expect this to continue to play out in fiscal 2025 and beyond. Total revenue for the quarter reached $42.3 million, representing a 1% increase compared to the same period last year.

Speaker Change: and after investing a lot of effort and in some case, a lot of money. They end up realizing that these bigger renders are not really optimized for a high-bullying efficient supply chain. And so we end up winning them back.

Peter Brereton: So, we've won back, I think at this point, we're running close to 90% of the ones that have sort of tried to move away from us and have now come back.

Speaker Change: So we've won back, I think at this point we're running close to 90% of the ones that have tried to move away from us and have now come back.

Gavin Fairweather: That's great to hear, and then maybe just to fall upon pharmacy, I think he said half a dozen customers live.

Speaker Change: At-screen to hear, then maybe just to fall upon Pharmacy, I think he said half a dozen customers live. I hear as how many of you are already into speaking to on this, or how many being kind of qualified and put into the type on any, any kind of color on how broad the conversations are will be helpful.

Peter Brereton: Here's how many of your IDNG be speaking to on this or how many being kind of qualified and put into the pipe on any any kind of color on how broad the conversations are be helpful. Yeah, I mean, it's, I mean, it's across the board, right? I mean, there's so much money in here that almost everyone is talking about it in some way, shape, or form. What's harder to predict is, you know, when they'll actually move. But, you know, we've actually got a pharmacy event happening in California. In, I think it's toward the end of this month, I think it is.

Mark Butler: Total revenue for the quarter reached $42.3 million, representing a 1% increase compared to the same period last year. It's important to note that when hardware revenue is excluded, the growth rate jumps to 9%. The strong underlying growth in SAS revenue is somewhat muted here by year over year fluctuations in both professional services and hardware. Our primary focus remains on driving consistent growth in our core SAS revenue stream, and we're not concerned about the variability in professional services and hardware components of the business.

Mark Butler: It's important to note that when hardware revenue is excluded, the growth rate jumps to 9%. The strong underlying growth in SASS revenue is somewhat muted here by year-over-year fluctuations in both professional services and hardware. Our primary focus remains on driving consistent growth in our SASS revenue stream, and we're not concerned about the variability in professional services and hardware components of the business. Professional services revenue for the first quarter was $13.4 million. That was down 10% from $14.9 million reported for the same quarter last year and down from $14.4 million sequentially compared to Q4. As noted in our MDNA, the timing of professional services revenue is affected by project delivery schedules, which can be outside of our control.

Speaker Change: Yeah, I mean, there's so much money in here that

Speaker Change: Almost everyone is talking about it in some way, super form. What's harder to predict is, you know, when they'll actually move. But, you know, we've actually got a pharmacy event happening in California. In

Peter Brereton: But, you know, that brings together some pharmacy and supply chain leaders to sort of look at what all we're doing in pharmacy. And, you know, we're pretty happy with the, with the turnout. We've got quite a number of networks from across the country that are heading out to Newport Beach and California for, you know, to hear the story. Here, what we're doing here, the dollars and cents that will be saved. And, you know, the gain, I mean, it's, I mean, we emphasize dollars and cents because we're supply chain guys. But what the hospital networks are saying is, you know, it also impacts patient safety.

Speaker Change: I think it's toward the end of this month I think it is.

Mark Butler: Professional services revenue for the first quarter was $13.4 million. That was down 10% from $14.9 million reported for the same quarter last year, and down from $14.4 million sequentially compared to Q4. As noted in our MDNA, the timing of professional services revenue is affected by project delivery schedules, which can be outside of our control. Recent quarters have demonstrated that we're staff to deliver more than $14 million of professional services revenue per quarter, and based on our current backlog and visibility in the project timelines, we expect to return to this level.

Speaker Change: But you know, that brings together some pharmacy and supply chain leaders to sort of look at what all we're doing in pharmacy.

Speaker Change: and we're pretty happy with the turnout. We've got quite a number of networks from across the country. They're heading out to Newport, Peach and California for it.

Speaker Change: and you know, to hear the story.

Speaker Change: Here, what we're doing here, the dollars and cents that'll be saved.

Speaker Change: and you know the game, I mean it to get to...

Mark Butler: Recent quarters have demonstrated that we're staff to deliver more than $14 million of professional services revenue per quarter, and based on our current backlog and visibility in the project timelines, we expect to return to this level. Supporting this, we had the strong professional services bookings in Q1 at $17.2 million, and that was up 25% compared to the same period last year. We expect professional services revenue will continue to fluctuate based on the balance of integration partner involvement and project delivery time. For the first quarter of fiscal 2025, gross margin was 47% compared to 46% in the same period last year.

Speaker Change: I mean we have decided dollars in cents because we're supply chain guys, but what the hospital that works are saying is, you know, it also impacts patient safety. So it really is a win-win and you know, we're seeing very, very broad interest.

Peter Brereton: So, so it really is a win-win. And, you know, we're seeing very, very broad interest. As I say, the question is how fast will they actually sign so far. You know, we're seeing, you know, pretty much every quarter, we're adding another pharmacy project. So, we're pretty excited about where we're at.

Speaker Change: is a question that's how fast will they actually sign. So far, we're seeing pretty much every quarter we're adding in a pharmacy project. So we're pretty excited about what we're at.

Mark Butler: Supporting this, we had strong professional services bookings in Q1 at $17.2 million, and that was up 25% compared to the same period last year. We expect professional services revenue will continue to fluctuate based on the balance of integration partner involvement and project delivery time, for the first quarter of fiscal 2025, gross margin was 47% compared to 46% in the same period last year. Combined SaaS, maintenance, support, and professional services gross margin for the three months ended July 31st, 2024, was 49%.

Gavin Fairweather: Thank you. I appreciate that. Maybe a couple for Mark.

Mark Butler: First, we touch on SaaS revenue recognition. If I take your ARR exiting fiscal 24, I guess it would have implied a bit higher SaaS revenue than you posted in Q1. Are there some larger deals with maybe some longer go-lives in the mixer? Yeah, I think the thing that moves the timing there is like in Q4, some of that business would have actually started revenue recognition in Q4, so you don't pick up net, you know, the whole increase in the subsequent quarter, so that's one dynamic in there, if you follow me. And the other dynamic is, you know, we do, from time to time, you know, sign a deal and, and, and agree, you know, to start the, the SaaS period a little bit down the road.

Speaker Change: Appreciate that. Maybe a couple from Mark. First, we touch on Sass Revenue Recognition. If I take your air, our exiting fiscal 24, I guess it would have implied a bit higher Sass Revenue than you posted in Q1. So are there some larger deals with maybe some longer go lives in the mix there?

Speaker Change: Yeah, I think the thing that moves the timing there is like in Q4

Mark Butler: Combined Sath's maintenance, support, and professional services gross margin for the three months ended July 31st, 2024, was 49%. That was down compared to 50% in the same period last year. The impact of increasing SASS margins in the first quarter of fiscal 2025, which by the way continued to track as planned, was offset by the impact of reduced professional service margins in the current quarter. We're very happy with the continued positive trajectory in our SASS margin profile. Net profit in the quarter was down about $400,000 to $798,000 compared to 1.2 million in the same quarter last year.

Speaker Change: Some of that business would have actually started revenue recognition in Q4.

Speaker Change: So, you don't pick up net, you know, the whole increase in the subsequent quarter, so that's one dynamic in there, if you follow me.

Mark Butler: That was down compared to 50% in the same period last year. The impact of increasing SaaS margins in the first quarter of fiscal 2025, which by the way continued to track his plan, was offset by the impact of reduced professional service margins in the current quarter. We're very happy with the continued positive trajectory in our SaaS margin profile. Net profit in the quarter was down about $400,000 to $798,000 compared to 1.2 million in the same quarter last year.

Speaker Change: and the other dynamic is, you know, we do, from time to time, you know, sign a deal and, and...

Speaker Change: and I agree, you know, to start the the the fast period a little bit down the road so it might not start.

Mark Butler: So it might not start, you know, our typical is, you sign it, you put it up on the public cloud infrastructure and you start recognizing revenue. We have some, some deals that, that, that we do that, we, you know, we agree to delay that start for, you know, three months or even a little bit, a little bit longer than that. So that would have had an impact, you know, that would have a negative impact of that 8 million turning into, you know, one to one, you know, quarterly revenue recognition in Q1. Okay, that's helpful.

Speaker Change: in our typical as, you know, you sign it.

Speaker Change: You put it up on the public cloud infrastructure, and you start recognizing revenue. We have some deals that we agree to delay that start for three months or even a little bit longer than that. So that would have had an impact, that would have had a negative impact of that 8 million turning into one to one quarterly revenue recognition and Q1.

Mark Butler: Adjusted EBITDA was 2.6 million in Q1 fiscal 2025, compared to 3.2 million same period last year. We ended Q1 fiscal 25 with a solid balance sheet. We had cash in short-term investments of $27.1 million and no debt. As Peter mentioned, we used $2.2 million of cash in the quarter to buy back shares under our normal course issue or bid.

Mark Butler: Adjusted EBITDA was 2.6 million in Q1 Fiscal 2025 compared to 3.2 million same period last year. We ended Q1 Fiscal 25 with a solid balance sheet. We had cash in short-term investments of $27.1 million and no debt. As Peter mentioned, we used $2.2 million of cash in the quarter to buy back shares under our normal course issue or bid.

Mark Butler: And then lastly, for me on the guidance, you know, you reiterated that for the year for high single digit growth and EBITDA margins as well, which is, you know, tick above where you're operating and the key one. So is the read through that you have, you know, pretty good visibility towards, you know, top line acceleration and margin expansion throughout the course of the year. Yeah, I mean, I think what we have there is, you know, we have this SaaS engine that's cooking. And we, you know, that gives a lot of confidence, and, you know, that's recurring, mostly recurring revenue.

Speaker Change: Okay, that's helpful. And then lastly for me on the guidance, you reiterated that for the year for high-single to to growth.

Speaker Change: and an e-bidom.

Martins: Martins as well, which is...

Speaker Change: You know, tick above where you're operating it.

Speaker Change: and the key one. So, is the read through that you have pretty good visibility towards top law and acceleration and margin expansion.

Mark Butler: Additionally, the board yesterday approved a quarterly dividend of 8 cents a share.

Mark Butler: Additionally, the board yesterday approved a quarterly dividend of eight cents a share.

Mark Butler: With respect to financial guidance and moving now to slide 5, we are reiterating full-year 25 guidance as follows. Total revenue growth between 7 and 9 percent. SaaS revenue growth between 30 and 32 percent.

Speaker Change: of the course of the year.

Speaker Change: Yeah, I think what we have there is, you know, we have this sass engine that's cooking and we, you know, that gives a lot of confidence and

Mark Butler: So what's going to happen this year is, is, you know, fairly well baked. Sure, we got to sign, you know, we got to, don't give me wrong, we got to sign business in Q2 that turns into Q3 and Q4 revenue. And we have to sign business Q3 that that turns into Q4 revenue. But, you know, a lot of that stuff is pretty locked down. And that's what we're, you know, that's what we're laser focused on. We think that the professional services world, we've talked about that a little bit, kind of hard to call, but, you know, we do think that the future looks, looks pretty good, pretty good there for us on that front, given the state of the backlog and, you know, current view on, on project timing.

Speaker Change: You know, that's recurring mostly recurring revenue, so what's going to happen this year is fairly well baked.

Mark Butler: And adjusted EBITDA margin between 8 and 9 percent. Additionally, we're reiterating adjusted EBITDA margin guidance for fiscal 2026 of between 10 and 11 percent.

Speaker Change: I'm sure we got a sign, you know we got it, don't give me wrong we got a sign business in

Speaker Change: and Q2 that turns into...

Speaker Change: Q3 and Q4 revenue, and we have to sign business, the Q3 that turns into Q4 revenue, but you know a lot of that stuff is pretty locked down and that's what we're, you know, that's what we're laser focused on.

Peter Brereton: I'll now turn the call back to Peter to provide some outlook comments. Thanks Mark. Texas kicked out fiscal 25 with solid performance building on the strong momentum from last year. Our balance sheet remained strong, supported by a healthy backlog and sales pipeline. We are seeing widespread buyer intent across target markets with opportunity cycles accelerated by a highly capable sales team with the tools, talent and strategic partners to capitalize on a market ready to invest.

Speaker Change: We think that the professional services world we've talked about that a little bit.

Speaker Change: Kind of hard to call, but you know, we do think that the future looks pretty good, pretty good there for us on that front.

Mark Butler: I mean, hardware is always, you know, this one, Gavin, it's, it's always tricky to call. You know, we had a $4 million quarter here in, in Q1. And, you know, last year, we were at, you know, close to seven or over 7 million each quarter. We're not going to be back at those levels. So, you know, what happens with hardware is sort of, you know, we have, we have still some booking and delivery to, to manage, you know, in the back half of the year for sure. But those are the key dynamics that we, that we thought through in reiterating that guidance.

Speaker Change: Give him the state of the backlog and current view on project timing. Hardware is always, you know, this one's given. It's always tricky to call. You know, we had a $4.00 quarter here in Q1.

Peter Brereton: As mentioned earlier, our existing footprint in key markets reinforces our confidence that we are well positioned to upsell and cross-sell with health care and pharmacy by extension serving as an important growth engine for us. Our value proposition pharmacy is compelling and we see no signs of this slowing down. Over and above our IDN business with the added pharmacy white space, we are seeing growth signs in our medical and pharma distribution sector driven partially by that DSESA legislative pressure mentioned earlier.

Speaker Change: And, you know, last year we were at, you know, close to seven or over seven million each quarter. We're not going to be back at those levels. So, you know, what happens with hardware is sort of, you know, we have still some booking and delivery to...

Speaker Change: to manage in the back half of the year for sure. But those are the key dynamics that we thought through and reiterating that guidance.

Gavin Fairweather: Appreciate it. That's it for me. Thank you. Sure.

Speaker Change: I appreciate it. That's it for me. Thank you.

Gavin Fairweather: Thanks, Gavin.

John Shah: Your next question comes from John. Show with National Bank. Your line is now.

Gavin: Sure, thanks, Gavin.

Speaker Change: Your next question comes from John Show with National Bank, your line is now open.

Peter Brereton: I should mention DSESA is the drug supply chain security act. It requires traceability with that Texas solutions enable. Our converging and general distribution business also represents a substantial market opportunity. We are well positioned to pursue new marketplaces and geographies within this space. We will continue to invest to drive our growth alongside a market that is changing. Change is spurred by agent legacy systems, digital adoption and a fundamental shift in consumer expectations, which now demand more efficiency, transparency and responsiveness from supply.

Peter Brereton: Good morning. Thanks for taking my question. So could you give us an update on the hospital spending environment because, at the beginning of the year, it was kind of expected that hospitals in the US will see stronger cashful generations to support their capital expenditure project. Is that through the case? Yeah, it seems to be very much the case. Like one of the deals we closed in Q1, for instance, was a deal that we expected to close in December. And then, at the last minute, the hospital board put all of that type of spending on hold.

Speaker Change: Take a good morning. Thanks for taking my question. So could you give us an update on the hospital spending environment because at a beginning of the year was kind of expected that hospitals in the U.S. will see stronger cash flow generations support their capital expenditure project? Is that through the case?

Speaker Change: Yeah, it seems to be very much the case, like one of the deals we closed in Q1, for instance, was a deal that we'd expected to close in December

Peter Brereton: Changes spurred by aging legacy systems, digital adoption and a fundamental shift in consumer expectations, which now demand more efficiency, transparency, and responsiveness from. We are pleased that our Q1 results continue to demonstrate our dominance in key markets and emerging opportunity in growth markets. The wave of change in system modernization and supply chain is underway, and businesses are actively investing in the tools they need to adapt to consumer expectations. As we look ahead, we are confident in our ability to seize market opportunity and presence in these rapidly growing markets around the world.

Speaker Change: and then at the last minute the hospital board put all of that type of spending on a whole day come through.

Mark Butler: They'd come through calendar 23, writing cashful and negative, and they just decided to put it on hold. But they went ahead and signed in Q1. They're back to cashful deposits of earnings for the rolling along more pleasantly. So we're seeing that pretty much across the board in the US healthcare space. Okay, thanks.

Speaker Change: Calendor 23, Runningcastle, and Negative, and they just decided to put her on hold.

Peter Brereton: We are pleased that our Q1 results continue to demonstrate our dominance in key markets and emerging opportunity in growth markets. The wave of change in system modernization and supply chain is underway and businesses are actively investing in the tools they need to adapt to consumer expectations. As we look ahead, we are confident in our ability to seize market opportunity and presence in these rapidly growing markets around the world.

Speaker Change: But, you know, they went ahead and signed in Q1, you know, they're back to Casual Plaza of Evidence, sort of rolling along more polisarily. So we're seeing that pretty much across the board in, you know, in the US healthcare space.

Mark Butler: The hardware revenue represents a recent low. So just the modeling questions. How much hardware revenue should we model going forward? Do you think the Q1 level is going to be a good benchmark? Yeah, I mean, John, we don't, we don't, as you know, we don't provide the specific revenue guidance on hardware. But you know, like I said last year, we were at seven and seven, you know, close to seven million and over seven million a quarter. We're not, we're not going to be at those, at those levels for this year. You know, that was the result of pent-up demand, you know, at the beginning of last year.

Speaker Change: Okay, thanks. The hardware method represents a recent law, so just the model and questions. How much hardware revenue should we model going forward? Do you think the key one Love was going to be a good benchmark?

Peter Brereton: And so in summary, I want to remind analysts and investors of our key themes for fiscal 25. First, an emphasis on continuing to refine our SaaS software, so it is easy to use an upgrade and even easier to recommend appears. 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, we are committed to harnessing the full potential of data to drive value and innovation.

Peter Brereton: And so in summary, I want to remind analysts and investors of our key themes for fiscal 25. First, an emphasis on continuing to refine our SaaS software so it is easy to use, an upgrade, and even easier to recommend appears. 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, we are committed to harnessing the full potential of data to drive value and innovation. Across our solutions, our focus will be on leveraging data to enhance our offerings and generate greater customer value.

Speaker Change: Yeah, I mean John, we don't provide specific revenue guidance on hardware, but you know, like I said last year we were at 7 and 7, you know, close to 7 million and over 7 million a quarter we're not going to be at those.

Speaker Change: at those levels for this year. That was the result of

Speaker Change: Pentup Demand, you know, at the beginning of last year, a pretty large backlog, you know, that sort of was a hangover from COVID era, chip shortages that kind of flow through our...

Mark Butler: Well, a pretty large backlog, you know, that sort of was a hangover from COVID-era chip shortages that kind of flow through our hardware revenue across last year. So, you know, I think, you know, if we read the T-leaves a little bit, you know, and I'll give you a real broad one here, John, it's somewhere between where we are in Q1 and where we were at the low point last year in a quarter. That's where the hardware revenue range is likely to be. Okay, got it.

Peter Brereton: Across our solutions, our focus will be on leveraging data to enhance our offerings and generate greater customer value. With Rex Ulsterman board as our chief strategy officer, we are developing a path to advancing our data capabilities and maximizing their impact. As a final point, I'd like to stress across our markets, we'll continue to prioritize customer satisfaction and success. We have long stood by the philosophy of customers for life. A big part of that formula is to deliver value quickly, stay connected, and expand on the value delivered.

Speaker Change: or Hardware Revenue across last year, so, you know, I think...

Speaker Change: You know, if we read the tea leaves a little bit, you know, and I'll give you a real broad one here, John, it's somewhere between where we are in Q1 and where we were at at the low point last year in a quarter, that's where the hardware revenue range is likely to be.

Operator: With that, we will open the call for questions. Thank you. Thank you, ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the one on your touchstone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the two. If you are using a speaker phone, please lift the hands up before pressing any keys.

Operator: With that, we will open the call for questions. Thank you. Thank you, ladies and gentlemen.

Peter Brereton: A last question is the Peter, could you give us an update on your FET RAM project? Yeah, the FET RAM project has kicked off. We have a, we actually have a pretty large government agency that is great to be our sponsor. That, you know, that project also seems to be moving ahead nicely. Realistically, I think it will take us to sort of December of 25 to complete the full process. You know, it's one of those things where, before you get into it, everyone tells you, yeah, it's about a year. Once you get into it, they all admit, well, actually, it's more like 18 months.

Speaker Change: Okay, got it. The last question is Peter, could you give us updates on your FET RAM project?

Operator: We will now begin the question and answer session. Should you have a question, please press star followed by the one on your touchstone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the two. If you are using a speaker phone, please lift the hands up before pressing any keys.

Peter Brereton: The Fed Grant project is kicked off. We actually have a pretty large government agency that is agreed to be our sponsor.

Peter Brereton: That project also seems to be moving ahead nicely.

Amir: Your first question comes from Amir. Is that with Ventum Capital Markets? Your line is now open.

Amir: Your first question comes from Amir. Is that with Ventum Capital Markets?

Peter Brereton: Realistically

Speaker Change: I think...

Speaker Change: It will take us to sort of December of 25.

Amir: Your line is now open.

Peter Brereton: Peter, Mark, good morning. Thanks for taking my question. Can you grasp on the continued expansion into pharma? I understand the market is largely green field, but I wonder, are there any inorganic opportunities to accelerate your penetration, for instance, buying a point-to-lution provider or another sort of software company, maybe a buy-side software? We don't think so. Not that we haven't poked around, but if you say it's so green field in terms of this approach to running a completely centralized pharma, the CPSC, that there's really nobody doing it.

Peter Brereton: Peter, Mark, Good morning. Thanks for taking my question. Can you grasp on the continued expansion into pharma? I understand the market is largely green field, but I wonder, are there any inorganic opportunities to accelerate your penetration, for instance, buying a point-to-lution provider, or another sort of software company, maybe a buy-side software? We don't think so. Not that we haven't poked around, but if you say it's so greenfield in terms of this approach to running a completely centralized pharma, the CPSC, that there's really nobody doing it. With the last couple of years, we've now built out the platform to properly manage 340B and properly manage the daily distribution of drugs out to a site.

Speaker Change: to complete the full process.

Speaker Change: You know it's one of those things where before you get into it, everyone tells you you had to put a year. Once you get into it, they all admit well actually it's more like 18 months.

Peter Brereton: And so that project is underway. Many of the agencies, by the way, have been granted additional grace period because of, you know, so many of the vendors are, it is taking all of us longer to get to true FET RAM certification. So, and in the meantime, these government agencies still need solutions. So, many of the agencies have been granted additional grace periods to run non-FET RAM solutions as long as the vendor is on route to FET RAM. So, you know, overall, we think it looks pretty good. I mean, it touches not only federal government agencies that we have as existing clients and that we have as prospects, but it also, and you probably know this, but it also touches a lot of the big state-owned hospital networks that have decided to adopt either what's called TechRamp, which is really a version of FET RAM put out by the state of Texas, or FET RAM.

Speaker Change: and so that project is underway. Many of the agencies, by the way, have been granted additional grace period because so many of the vendors are, it is taking all of us longer to get to true federal absurdification. So, and in the meantime, these government agencies still need solutions.

Speaker Change: So many agencies have been granted additional grace periods to run non-fed ramp solutions as long as the vendor is on route to fed ramp.

Speaker Change: So, you know, overall we think it looks pretty good. I mean, it touches not only federal government agencies that we have as good thing clients and that we have as prospects, but it also, and you probably know this, but it also touches a lot of the big state-owned hospital networks.

Peter Brereton: With the last couple of years, we've now built out the platform to properly manage 340b and properly manage the daily distribution of drugs out to a site. You may have heard me say it before, but like some of this just comes down to, for most hospital networks, when somebody checks into a ward, often a weak supply of the drugs they need are sent to them. And then two days later, it turns out they're already gone.

Peter Brereton: You may have heard me say it before, but some of this just comes down to, for most hospital networks, when somebody checks into a ward, often sort of a weak supply of the drugs they need are sent to them. Then two days later, it turns out they're already gone, and sort of five days of leftover drug is to sit there and rot on the shelf. With this approach, it's really going to a, you know, not for Tylenol, and I kind of think, but for any of the more expensive drugs. We're literally set up to sort of run that splicing end-to-end and then deliver early morning every day just what's needed that morning.

Speaker Change: and that have decided to adopt either what's called Techram, which is really a version of Fedram, but I hope by the State of Texas.

Peter Brereton: And a lot of them are taking the position that you can be either as long as you're either FET RAM or TechRamp; you know, they can deploy your platform. So, we're tracking pretty well, and we'll be ramping up investment in it over the next, I mean, starting now, but it'll really ramp up through the year and probably sort of full investment level by Q4, Q1, and Q1 of next year.

Speaker Change: or FedRap, and a lot of them are taking the position that you can be either as long as you're either FedRap or Keckram.

Speaker Change: and they can deploy your platform, so we're tracking pretty well and we'll be ramping up investment in it over the next, I mean starting now.

Peter Brereton: And sort of five days of leftover drug is just sort of sit there and rot on the shelf. So with this approach, it's really going to not for Tylenol, and I kind of think, but for any of the more expensive drugs. We're literally set up to sort of run that splicing end-to-end and then deliver early morning every day just what's needed that morning. And the savings are astronomical. But nobody else is really doing it.

Speaker Change: but it'll really ramp up through the year and probably reach sort of full investment level by Q4, Q1 of next year.

John Shah: Thanks for the colors and pop along.

John Shah: Thanks, John.

Speaker Change: Thanks for the color, the pasta line.

Suthan Sukumar: Ladies and gentlemen, as a reminder, should you have a question, please press star one, sorry. Your next question comes from Suthan Sukumar with Speedful. Your line is now open.

Peter Brereton: And the savings are astronomical. But nobody else is really doing it.

John Show: Thanks, John.

Speaker Change: Ladies and gentlemen, as a reminder, do you have a question please press one. Start one, sorry.

Peter Brereton: So it's a new ground and I think we just got to build it and sell it. Fantastic. Then is it like still early days, I guess, to talk about how that could expand your ARR per network? I know you always mention like average ARR per network is like $3 million and obviously not all networks will have pharma as a target. But can you maybe help us quantify where the ARR might go for networks worth pharma as a target?

Peter Brereton: So it's a new ground, and I think we just got to build it and sell it.

Speaker Change: Your next question comes from Sudan, Sukhumar, with Beful, your line is now open.

Suthan Sukumar: Good morning, Jeff. For my first question, I wanted to touch on the looking strength this quarter. Can you speak a little about where you're strength today?

Peter Brereton: Fantastic. Then is it like still early days, I guess, to talk about how that could expand your ARR per network? I know you always mention like average ARR per network's like $3 million and obviously not all networks will have pharma as a target. But can you maybe help us quantify where the ARR might go for networks worth pharma as a target? Yeah, and we haven't updated our slide on that: the total ARR. But on average, like we're looking across sort of very large networks and medium and smaller networks and so on. And there's a wide variation in terms of how they adopt, how they deploy, etc.

Sukhumar: Good morning, Jeff. For my first question, I wanted to touch on the...

Sukhumar: Looking to Trent this quarter, can you speak a little bit about where you can Trent today, what was the mix between the different markets and how much that is starting to be driven through the Pardoner Channel.

Mark Butler: What was the mix between the different markets and how much of that is starting to be driven through the Partner Channel? I think that's a Mark question.

Speaker Change: The End

Speaker Change: The End.

Peter Brereton: Yeah, and we haven't updated our slide on that, the total ARR. But on average, like we're looking across sort of very large networks and medium and smaller networks and so on. And there's a wide variation in terms of how they adopt, how they deploy, et cetera. But we think on average that it adds somewhere around a million bucks CAD to the ARR. Fantastic. And that's just for the networks worth pharma as a target for the post to hold.

Mark Butler: Yeah, sure. So Suthan, I think we had a good, we had actually a good mix across health care and complex distribution here. Health care slightly led the way, but a really solid performance from complex distribution in that mix. I think Peter mentioned in his comments, we had, we did have any logo and distribution, so pretty excited about that. And in health care, it was really a mix of some good expansion stuff and a pretty significant migration from an existing customer. So it was kind of a pretty good mix across the board.

Trent: [inaudible] So, so, so, I think, um...

Speaker Change: You know, we had a good, we had a, actually a good mix across healthcare and complex distribution here, healthcare, you know, slightly led away, but a really solid performance from complex distribution in that mix.

Peter Brereton: But we think, on average, that it had somewhere around a million bucks CAD to the ARR.

Peter Brereton: Fantastic. And that's just for the networks worth Pharma as a target. Right. One of the things that's interesting with pharma, while we're on the subject, is it spreads across a much wider segment of the market. I mean a lot of what we sell, we only go after networks that have a billion in that patient revenue or more. One of the things we're seeing now is even networks that go down to half a billion in revenue can still get some serious ROI from the pharmacy platform.

Speaker Change: and I think Peter mentioned in his comments, we had...

Peter Brereton: One of the things that's interesting with pharma while we're on the subject is it spreads across a much wider segment of the market. I mean, a lot of what we sell we only go after networks that have a billion in that patient revenue or more. One of the things we're seeing now is even networks that go down to half a billion in revenue can still get some serious ROI from the pharmacy platform.

Peter Brereton: You know, we did have a new logo in the distribution, so pretty excited about that.

Speaker Change: and in health care it was really a mix of some good expansion stuff and a pretty significant migration from an existing customer. So it's kind of a pretty good mix across the board.

Mark Butler: From a partner perspective, where are partners playing a more important role in terms of driving growth? Is it really in the health care space, or really across the board? Yeah, it's a mix, but definitely it's more important for us in the health care space. If you look at where the pipeline influences from a dollar perspective, it's certainly tipped toward health care. We have more SIs and larger SIs that have been involved with us in projects on that side. We do have some smaller SIs that are really very active with us on the complex distribution side.

Speaker Change: and it's from a partner perspective where a partner is playing a more important role in terms of driving growth is a really in the healthcare space or with the across the board.

Peter Brereton: So it may be the informancy, the number of networks we're pursuing expands as well.

Peter Brereton: So it may be the infarmacy, the number of networks we're pursuing expands as well.

Peter Brereton: That's good color. Like regarding your comments on professional services, you know, like nice ethics on the bookings and actually a very nice ethic over the last three quarters. But I just wonder, you know, like with more work being handled by implementation partners, how should we think about professional services revenue longer term? Do we sort of think it stabilizes around like 14, 15 million dollars, or could there be some upside eventually just like big picture? Yeah, I mean, super big picture there, Emma. I think we've hit on this before. We certainly expect that professional services revenue growth will be moderated because of those exact factors that you mentioned, among others.

Mark Butler: Mark, like regarding your comments on professional services, like nice uptick on the bookings and actually a very nice uptick over the last three quarters. But I just wonder, you know, like with more work being handled by implementation partners, how should we think about professional services revenues on longer term? Do we sort of think it stabilizes around like $14, $15 million or could there be some upside eventually just like big picture?

Speaker Change: Yeah, it's a mix, but definitely it's more important for us in the healthcare space if you look at where the pipeline influences from a dollar perspective, it's certainly tipped.

Speaker Change: It's certainly tip toward healthcare. We have, um,

Speaker Change: You know, we have more SIs and larger SIs that have been involved with us in projects on that side. We do, we do have some smaller SIs that are really very active with us on the complex distribution side, and actually there's

Mark Butler: And actually, there's some of those in particular, one in particular, that actually, in terms of an end project delivery capacity, is very far along the line. So that's kind of the mix of what we see from the partners. And the level of influence there is, I think Peter mentioned in his comments about a third of the pipeline over the last 12 months has been influenced by partners. And when you look at wind rates, you know, you look at the deals that we actually win. The level of partner involvement in one deal is even higher. You know, it's around 50%.

Mark Butler: Yeah, I mean, super big picture there, Emma, I think we've hit on this before. We certainly expect that professional services revenue growth will be moderated because of those exact factors that you mentioned among others. You know, that said, we do see some growth there. We don't see it flat lining. The business is going to grow and we're always going to be playing, you know, we think we're always going to be playing a key role in the real product product side of our implementation processes, even as more more broad professional services work and implementation approach gets covered by service providers.

Speaker Change: There's some of those in particular that actually in terms of an end project delivery capacity is very far along the line.

Speaker Change: That's kind of the mix of what we see from the partners and the level of influence there is, I think Peter mentioned his call is about a third of the pipeline over the last 12 months has been influenced by partners and when you look at win rates.

Mark Butler: So, you know, we don't see that, you know, in general decline, we don't really see it flat lining. You know, we see it growing, we just see it growing a lot, a lot more, obviously a lot less quickly than our understanding growth driver. So we shouldn't read too much into the revenue line when we see like the bookings go from 9 to 12 to 17 million on professional services. No, I don't think so.

Peter Brereton: You know, you look at the deals that we actually win, the level of partner involvement in one deals is even higher, you know, it's around 50%.

Suthan Sukumar: Okay.

Suthan Sukumar: Great. Good color.

Peter Brereton: Okay.

Suthan Sukumar: On the data strategy, I think that's an encouraging comment or just given some of the opportunities and some is to say net new area of investments for the company. or it is just sort of a reallocation of existing spendent, and how should we think about really the opportunity here? Is this, you know, is this really designed to be a product upsell opportunity, or is there not any difference, kind of a more broader product and services consulting type offerings that you can take to your clients? Sorry, you're referring to the Data Initiative? Yes. Yeah, I mean, we're seeing it as, I mean, we're seeing it as impacting several areas of the business.

Speaker Change: Good color and the...

Speaker Change: Data Strategy, I think that some encouraging commenters just given some of that.

Peter Brereton: So we shouldn't read too much into the revenue line when we see like the bookings go from 9 to 12 to 17 million on professional services. No, I don't think so. I mean, there's, you know, it's about timing and the balance that a bigger backlog creates in terms of managing that, you know, implementation timing and some level of consistency on that delivery. But yeah, I don't think you read that 17 and say, okay, well, that's going to translate if it was 12 last quarter, that's going to pop it, you know, quickly that 5 million is going to pop into the, yeah.

Speaker Change: and the opportunities in some of the early traction that you're seeing there is this a net new area of investment for the company and or is this a sort of a reallocation of existing spend it.

Speaker Change: and how should we think about really the opportunity here is this, you know, this really designed to be a product upsell opportunity or is there, or is there not turning it for kind of a more broader product and services consulting type offerings that you could take your clients.

Mark Butler: I mean, it's about timing and the balance that a bigger backlog creates in terms of managing that implementation timing and some level of consistency on that delivery. But yeah, I don't think you read that 17 and say, okay, well, that's going to translate if it was 12 last quarter, that's going to pop it quickly, that five million is going to pop into the, yeah.

Speaker Change #100: It's very you're referring to the data initiative.

Speaker Change #101: Yeah, yeah.

Speaker Change #102: Yeah, I mean, we're seeing it as...

Peter Brereton: Fantastic, then maybe one last one on Rex Alstrom joining the company. Two things like how did his hiring come about and can you speak to the specific areas where you expect to see. Immediate impact from you initiative under his leadership. Yeah, I mean, you know, there are guys out there in the market where when they come available, you just hire them. And Rex is one of those guys that we've known sort of roundabout in the industry for a number of years.

Peter Brereton: Fantastic.

Peter Brereton: Then maybe one last one on Rex Alstrom joining the company. Two things: like, how did his hiring come about, and can you speak to the specific areas where you expect to see. The immediate impact from your initiative under his leadership. Yeah, I mean, you know, there are guys out there in the market where, when they come available, you just hire them, and you know, Rex is one of those guys that we've known sort of round about in the industry for a number of years. And when we learned he was on the market, we literally just sort of created a position for him.

Speaker Change #102: I mean we're seeing it as impacting several areas of the business. One is we think it'll impact new account win rate in general distribution. You know there's a lot of height these days but AI and AI capability and how you're taking advantage of the data in the system to help decision makers sort of make key decisions.

Peter Brereton: One is we think it'll impact new account win rate and general distribution. You know, there's a lot of hype these days about AI and AI capability and how you're taking advantage of the data and the system to help decision makers sort of make key decisions. And we think this, you know, this will be a very competitive new account offer. You know, from the standpoint of the, you know, how we roll it out, we're seeing it as a combination of, you know, an additional SaaS offering that would spend right across our, you know, our various verticals from general distribution and, you know, even some of the health care distribution right over into, you know, the hospital space, including pharmacy, general supplies, et cetera.

Speaker Change #102: and we think this, you know, this.

Speaker Change #102: will be a very competitive new account.

Speaker Change #102: Offer, you know, from the standpoint of the, you know,

Speaker Change #102: You know how we roll it out, we're seeing it as a combination of

Speaker Change #102: in a digital SaaS offering that would spend right across our...

Peter Brereton: And when we learned he was on the market, we literally just sort of created a position for him. He brings a great deal of experience in basically monetizing data, combination of using AI, machine learning, et cetera, to create value for clients. And we're now at a point where we've got, you know, we have a massive amount of data residing in our public cloud infrastructure. Some of it contractually we're not allowed to use because our, you know, our customers, you know, see it as very private data.

Speaker Change #102: You know our various verticals from...

Speaker Change #102: from General Distribution and some of the healthcare distribution right over in two.

Peter Brereton: So it'll be a very broad-based approach. You know, it will; it will drive additional consulting. We expect, though, that our partners will pick up a lot of that consulting. It's a classic sort of kind of consulting that partners love to engage in and are well equipped to engage in. So we expect to provide the platform to do some of the consulting, but have a good percentage of the consulting handled by partners. Okay. Great.

Speaker Change #102: You know the hospital space including pharmacy, general supplies etc. so it will be a very broad-based approach.

Speaker Change #102: Wil, you know, will drive additional consulting. We expect though that our partners will pick up a lot of that consulting.

Speaker Change #103: It's a classic sort of kind of consulting that partners love to engage in, and are well equipped to engage in. So we expect to provide the platform to do some of the consulting, but have a good percentage of the consulting handled by...

Peter Brereton: So part of what Rex is working on is coming up with a value added offering where he could go back to those clients and say, okay, you know, if you will give us access to the data, this is how we'll anonymize it. This is how we'll make sure that the names and private information remains private, but this is the value you're going to get out of it. And we think there's a very compelling offering to take to our clients.

Bartonsham: by Bartonsham.

Peter Brereton: Thanks. And the, you know, the last question for me, guys, I'm on the health care side to give it an update on what you're seeing from a competitive standpoint. You know, it looks like you, you guys are still competitive position here well. And just kind of curious on what you see in the backdrop. And with respect to expansions, you know, a really good commentary here on the pharmacy opportunity. But what is a typical expansion looks like for, for one of your health care networks. And how is that pace of expansion playing out with some of the key market accounts that you landed over the years?

Bartonsham: Okay.

Speaker Change #105: Good, thank you.

Speaker Change #105: and the end of the video.

Speaker Change #106: Let me go. Well, that's what you're from me guys. I'm on the health care side. You can use an update on what you're seeing from a competitive standpoint.

Speaker Change #107: You know, look, you got to still competitively position here well and just kind of curious on what you see in the back drop.

Peter Brereton: You know, some of the stuff we were already working on, I mean, we've got a release coming out in October that is going to be using, you know, machine learning to present to a, you know, a BPS supply chain or an SVP supply chain. Literally, sort of what are the five metrics he needs to worry about today? So, you know, out of 60 or 70 metrics, it's going to be analyzing the whole network and sort of presenting him when he logged in in the morning with sort of, okay, forget the other 75.

Speaker Change #107: and the respective expansions, you know.

Peter Brereton: These are the five that you need to sweat about today. But there's a lot more we can do there. And so, you know, Rex is sort of learning our architecture, learning our market and then putting together a strategy to take advantage of all that.

Speaker Change #108: is a typical extension look like for a health care network and how that we've expected and playing out with some of the key market accounts that you've landed over the years.

Peter Brereton: Fantastic.

Peter Brereton: Yeah, I mean, it's a great question. And it's, you know, there's no one simple answer to it. I mean, we, you know, we look for champions of change throughout the market. And, you know, we can't, you can't just sort of sell, you know, these various add-ons and upsells and cross-sells. You can't sell them to a network that doesn't want to change. So, so we tend to look for champions of change. There is a wave running through pharmacy right now as a lot of younger pharmacists are now sort of taking over as chief pharmacy officers. And, you know, they're not content with the way pharmacy has run for the last number of years.

Speaker Change #109: Yeah, I mean, it's a great question, and there's no one simple answer to it, I mean, we look for champions of change throughout the market, and we can't, you can't just sort of.

Peter Brereton: Fantastic.

Peter Brereton: Congrats.

Operator: Can you grab a little staff of mine?

Peter Brereton: Thanks.

Speaker Change #109: So, you know, these various add-ons and upsells and cross-sells, you can't sell them to a network that doesn't want to change.

Operator: Thanks.

Gavin Fairweather: Your next question comes from Gavin. Bear with it with core market.

Gavin Fairweather: The question comes from Gavin. Fair with you with core market. Your line is now open.

Gavin Fairweather: Your line is now open.

Speaker Change #109: So we tend to look for champions of change.

Peter Brereton: Oh, hey, good morning. Thanks for taking my questions. Maybe just to start on the distribution business, given the green shoots that you've been seeing in the shifting competitive environment. I know you're putting in a few more marketing dollars to generate top-of-funnel. Curious if that's really begun, is that ramping up? Ben Andrews seeing response to the pipeline. Yeah, we're happy with what we're seeing there so far. You know, I mean, even data, new account in that market in the summer quarter. Summer quarter is usually pretty slow, but you know, we already added a new account in that market in the summer quarter, and we've last several quarters we've added a new account in that market of recorder.

Peter Brereton: Oh, hey, good morning. Thanks for taking my questions. Maybe just to start on the distribution business, given the green shoots that you've been seeing in the shifting competitive environment. I know you're putting in a few more marketing dollars to generate top of funnel. Curious if that's really begun? Is that ramping up? Ben Andrews, seeing response to the pipeline. Yeah, we're happy with what we're seeing there so far. You know, I mean, even data, new account in that market in the summer quarter, summer quarter is usually pretty slow, but you know, we already added a new account in that market in the summer quarter and we've last several quarters we've added a new account in that market of recorder.

Speaker Change #109: There is a wave running through pharmacy right now, as a lot of younger pharmacists are now sort of taking the taking over as chief pharmacy officers and

Peter Brereton: And so they're, they're looking for, you know, platforms that can support change. So, you know, we're obviously all over that. In the general supply area, we continue to have competition. I mean, Cardinal can compete to the OR, you know, GHX competes to some extent in general supplies. So, so we have competition in those areas. But we continue to be in a position where, if a network really wants an end-to-end platform and says, well, you know, maybe I'm starting in general supplies. But my long-term vision is that a single platform that covers every type of supply chain within my network.

Speaker Change #109: You know, they're not content with the way pharmacy has run for the last number of years and so they're looking for, you know, platforms and support change, so, you know, we're obviously all over that.

Speaker Change #109: in the...

Speaker Change #110: In the General Supply area, we continue to have competition, I mean, Cardinal compete in the OR.

Speaker Change #111: DHX competes to some extent in general supplies.

Speaker Change #111: So we have competition in those areas, but we continue to be in a position where if a network really wants an end and platform, it will, you know, start a general supplies, but my...

Peter Brereton: The competitive winback we mentioned, too, was pretty interesting because that was one where it was a client that had been on an old acquired platform that we had company that we acquired back in I think 2003. They've been running that platform for years and a couple of years ago, they decided it was time to modernize so they went to market, looked at our newer offerings, looked at some of our competitors newer offerings and decided to make a change.

Peter Brereton: The competitive winback we mentioned too was pretty interesting because that was one where it was a client that had been on an old acquired platform that we had company that we acquired back in I think 2003. They've been running that platform for years, and you know, a couple of years ago, they decided it was time to modernize, so they went to market, looked at our newer offerings, looked at some of our competitors' newer offerings, and decided to make a change. They've, as they got to know our competitors' offering in more detail, they end up deciding to shoot the project and come back and sign with us.

Speaker Change #111: Long-term vision is that a single platform that covers every type of supply chain within my network. Then we're still the only game in town and we continue to impact deep in that mode. I mean, just rolling out of pharmacy is another significant expansion of the mode, protecting that space.

Peter Brereton: Then, you know, we're still the only game in town. And we continue to, in fact, deepen that mode. I mean, just rolling out of pharmacy is another significant expansion of the mode, you know, protecting that, protecting that space. Okay, great.

Peter Brereton: They've, as they got to know our competitors offering in more detail, they end up deciding to shoot the project and come back and sign with us. So, you know, we love those kinds of stories and so far, I would say in the last three, four years, we've had probably five or six of those of people that it's it. They tend to happen, especially if companies have grown substantially, you know, they first signed with us when they were a $50 million business and now they're a $700 million business and I think, you know, it's time to go with one of the bigger vendors.

Peter Brereton: And, you know, after investing a lot of effort and in some cases a lot of money, they end up realizing that, you know, these bigger renders are not really optimized for a high volume efficient supply chain and so we end up winning the back. So, we've won back, I think at this point we're running close to 90% of the ones that have sort of tried to move away from us and have now come back.

Suthan Sukumar: Thanks for the call, agents, and I'll pass by.

Speaker Change #111: Okay, great, thanks for the college entrance and...

Suthan Sukumar: Thank you.

Peter Brereton: So, you know, we love those kinds of stories, and so far, I would say in the last three, four years, we've had probably five or six of those of people that it's it. They tend to happen especially if companies have grown substantially. You know, they first signed with us when they were a $50 million business and now they're a $700 million business, and I think, you know, it's time to go with one of the bigger vendors. And you know, after investing a lot of effort and, in some cases, a lot of money, they end up realizing that, you know, these bigger renders are not really optimized for a high volume efficient supply chain, and so we end up winning the back.

Operator: Thanks, Tim.

Speaker Change #111: of Pathways. Thank you. Thanks you, John.

Operator: I don't know for the questions at this time.

Peter Brereton: I will not turn the call over to Peter for closing remarks. Great. Thank you, everyone, for joining us today and taking the time to get this update on Q1.

Speaker Change #111: Don't know for the questions at this time, I will not turn the call over to Peter for closing remarks.

Peter Brereton: Great. Thank you everyone for joining us today and taking the time to get this update on Q1. We will look forward to talking to you with our Q2 results later in the fall and in the meantime if you have additional questions, as always, don't hesitate to reach out. Thanks and have a great day.

Operator: We will look forward to talking to you with our Q2 results later in the fall. And in the meantime, if you have additional questions, as always, don't hesitate to reach out.

Operator: Thanks and have a great day.

Operator: Thanks.

Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.

Peter Brereton: Thanks.

Speaker Change #112: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and out there. Please disconnect your lines.

Peter Brereton: So, we've won back, I think at this point, we're running close to 90% of the ones that have sort of tried to move away from us and have now come back.

Peter Brereton: That's great to hear and then maybe just to follow up on pharmacy, I think he said half a dozen customers live. Here's how many of your IDNG be speaking to on this or how many being kind of qualified and put into the pipe on any any kind of color on how broad the conversations are be helpful. Yeah, I mean it's across the board right I mean there's so much money here that almost everyone is talking about it in some way shape or form.

Peter Brereton: That's great to hear, and then maybe just to fall upon pharmacy, I think he said half a dozen customers live. Here's how many of your IDNG be speaking to on this or how many being kind of qualified and put into the pipe on any any kind of color on how broad the conversations are be helpful. Yeah, I mean, it's, I mean, it's across the board, right? I mean, there's so much money in here that almost everyone is talking about it in some way, shape, or form. What's harder to predict is, you know, when they'll actually move. But, you know, we've actually got a pharmacy event happening in California.

Peter Brereton: What's harder to predict is you know when they'll actually move but you know we've got a we've actually got a pharmacy event happening in California. In I think it's toward the end of this month, I think it is but you know that that brings together some pharmacy and supply chain leaders to sort of look at what all we're doing in pharmacy. And you know we're pretty happy with the with the turnout we've got quite a number of networks from across the country that are heading out to Newport Beach and California for you know to hear the story.

Peter Brereton: In, I think it's toward the end of this month, I think it is. But, you know, that brings together some pharmacy and supply chain leaders to sort of look at what all we're doing in pharmacy. And, you know, we're pretty happy with the, with the turnout. We've got quite a number of networks from across the country that are heading out to Newport Beach and California for, you know, to hear the story. Here, what we're doing here, the dollars and cents that will be saved. And, you know, the gain, I mean, it's, I mean, we emphasize dollars and cents because we're supply chain guys.

Peter Brereton: I'm here what we're doing here the dollars and cents that'll be saved and you know the gain I mean it's it's I mean we emphasize dollars and cents because we're supply chain guys but what the hospital networks are saying is you know it also impacts patient safety so so it really is a win-win and you know we're seeing very very broad interest. To say the question is how fast will they actually sign so far you know we're seeing you know pretty much every quarter we're adding a pharmacy project so we're pretty excited about where we're at. Thank you.

Peter Brereton: But what the hospital networks are saying is, you know, it also impacts patient safety. So, so it really is a win-win. And, you know, we're seeing very, very broad interest. As I say, the question is how fast will they actually sign so far. You know, we're seeing, you know, pretty much every quarter, we're adding another pharmacy project. So, we're pretty excited about where we're at. Thank you. I appreciate that.

Mark Butler: Appreciate that. Maybe a couple for Mark.

Mark Butler: Maybe a couple for Mark. First, we touch on SaaS revenue recognition. If I take your ARR exiting fiscal 24, I guess it would have implied a bit higher SaaS revenue than you posted in Q1. Are there some larger deals with maybe some longer go-lives in the mixer? Yeah, I think the thing that moves the timing there is like in Q4, some of that business would have actually started revenue recognition in Q4, so you don't pick up net, you know, the whole increase in the subsequent quarter, so that's one dynamic in there, if you follow me.

Mark Butler: First, we touch on the SaaS Revenue Recognition. If I take your ARR exiting fiscal 24, I guess it would have implied a bit higher SaaS revenue than you posted in Q1. Are there some larger deals with maybe some longer go-lives in the mixer? Yeah, I think the thing that moves the timing there is in Q4, some of that business would have actually started revenue recognition in Q4. So you don't pick up net the whole increase in the subsequent quarter, so that's one dynamic in there if you follow me.

Mark Butler: And the other dynamic is we do, from time to time, sign a deal and agree to start the SaaS period a little bit down the road. So it might not start. Our typical is you sign it, you put it up on the public cloud infrastructure and you start recognizing revenue. We have some deals that we do that we agree to delay that start for three months or even a little bit longer than that. So that would have had an impact. That would have a negative impact of that eight million turning into one-to-one quarterly revenue recognition in Q1. Okay, that's helpful.

Mark Butler: And the other dynamic is, you know, we do, from time to time, you know, sign a deal and, and agree, you know, to start the SaaS period a little bit down the road. So it might not start, you know, our typical is, you sign it, you put it up on the public cloud infrastructure, and you start recognizing revenue. We have some, some deals that, that, that we do that, we, you know, we agree to delay that start for, you know, three months or even a little bit, a little bit longer than that. So that would have had an impact, you know, that would have a negative impact of that 8 million turning into, you know, one to one, you know, quarterly revenue recognition in Q1.

Mark Butler: Okay, that's helpful. And then lastly, for me on the guidance, you know, you reiterated that for the year for high single digit growth and EBITDA margins as well, which is, you know, tick above where you're operating and the key one. So is the read through that you have, you know, pretty good visibility towards, you know, top line acceleration and margin expansion throughout the course of the year. Yeah, I mean, I think what we have there is, you know, we have this SaaS engine that's, that's cooking. And we, you know, that gives a lot of confidence, and, you know, that's recurring, mostly recurring revenue.

Mark Butler: And then lastly for me on the guidance you reiterated that for the year for high-single-digit growth and EBITDA margins as well, which is tick above where you're operating in the Q1. So is the read through that you have pretty good visibility towards top line acceleration and margin expansion throughout the course of the year. Yeah, I mean, I think what we have there is, you know, we have this SaaS engine that's that's cooking and we, you know, that gives a lot of confidence and, you know, that's recurring mostly recurring revenue.

Mark Butler: So what's going to happen this year is, you know, fairly well baked. Sure, we got to sign, you know, we got to, don't get me wrong, we got to sign business in Q2 that turns into Q3 and Q4 revenue and we have to sign business in Q3 that turns into Q4 revenue. But, you know, a lot of that stuff is pretty locked down and that's what we're, you know, that's what we're laser focused on.

Mark Butler: So what's going to happen this year is, is, you know, fairly well baked. Sure, we got to sign, you know, we got to, don't give me wrong, we got to sign business in Q2 that turns into Q3 and Q4 revenue. And we have to sign business Q3 that that turns into Q4 revenue. But, you know, a lot of that stuff is pretty locked down. And that's what we're, you know, that's what we're laser focused on. We think that the professional services world, we've talked about that a little bit, kind of hard to call, but, you know, we do think that the, the, the, the future looks, looks pretty good, pretty good there for us on that front, given the state of the backlog and, you know, current view on, on project timing.

Mark Butler: What we think the professional services world, we've talked about that a little bit, kind of hard to call, but, you know, we do think that the future looks pretty good, pretty good there for us on that front, given the state of the backlog and, you know, current view on on project timing. I mean, hardware is always, you know, this one Gavin, it's always tricky to call, you know, we had a $4 million quarter here in Q1 and, you know, last year we were at, you know, close to seven or over 7 million each quarter.

Mark Butler: I mean, hardware is always, you know, this one, Gavin, it's, it's always tricky to call. You know, we had a $4 million quarter here in, in, in Q1. And, you know, last year, we were at, you know, close to seven or over 7 million each quarter. We're not going to be back at those levels. So, you know, what happens with hardware is sort of, you know, we have, we have still some booking and delivery to, to manage, you know, in the back half of the year for sure. But those are the key dynamics that we, that we thought through in reiterating that guidance.

Mark Butler: We're not going to be back at those levels. So, you know, what happens with hardware is sort of, you know, we have still some booking and delivery to manage, you know, in the back after the year for sure. But those are the key dynamics that we, that we thought through in, in reiterating that guidance. Appreciate it.

Mark Butler: Appreciate it. That's it for me. Thank you.

Gavin Fairweather: That's it for me. Thank you. Sure. Thanks, Gavin.

Mark Butler: Sure. Thanks, Gavin.

John Shah: Your next question comes from John. Show with National Bank.

John Shao: Your next question comes from John, show with National Bank. Your line is now. Good morning, thanks for taking my question. So could you give us an update on the hospital spending environment because at the beginning of the year, it was kind of expected that hospitals in the US will see stronger, cashful generations to support their capital expenditure project? Is that through the case? Yeah, it seems to be very much the case.

John Shah: Your line is now.

John Shao: Like one of the deals we closed in Q1, for instance, was a deal that we expected to close in December. And then at the last minute, the hospital board put all of that type of spending on hold. They'd come through calendar 23, writing cash flow negative, and they just decided to put it on hold. But they went ahead and signed in Q1. They're back to cashful deposits of earnings for the rolling along more pleasantly. So we're seeing that pretty much across the board in the US health care space.

Peter Brereton: They'd come through calendar 23, writing cashful and negative, and they just decided to put it on hold. But they went ahead and signed in Q1. They're back to cashful deposits of earnings for the rolling along more pleasantly. So we're seeing that pretty much across the board in the US healthcare space.

Mark Butler: Okay, thanks.

Mark Butler: Okay, thanks. The hardware revenue represents a recent low. So just the modeling questions. How much hardware revenue should we model going forward? Do you think the Q1 level is going to be a good benchmark? Yeah, I mean, John, we don't, we don't, as you know, we don't provide the specific revenue guidance on hardware. But you know, like I said last year, we were at 7 and 7, you know, close to 7 million and over 7 million a quarter.

Mark Butler: The hardware revenue represents a recent low. So just the modeling questions. How much hardware revenue should we model going forward? Do you think the Q1 level is going to be a good benchmark? Yeah, I mean, John, we don't, we don't, as you know, we don't provide the specific revenue guidance on hardware. But you know, like I said last year, we were at seven and seven, you know, close to seven million and over seven million a quarter. We're not, we're not going to be at those levels for this year. You know, that was the result of pent-up demand, you know, at the beginning of last year.

Mark Butler: We're not, we're not going to be at those at those levels for this year. You know, that was the result of pent up demand, you know, at the beginning of last year. Well, pretty large backlog, you know, that sort of was a hangover from COVID era chip shortages that kind of flow through our hardware revenue across last year. So, you know, I think, you know, if we read the tea leaves a little bit, you know, and I'll give you a real broad one here, John. It's somewhere between where we are in Q1 and where we were at the low point last year in a quarter. That's where the hardware revenue range is likely to be.

Mark Butler: Okay, got it.

Peter Brereton: A last question is the Peter, could you give us an update on your FET RAM project? Yeah, the FET RAM project has kicked off. We have a, we actually have a pretty large government agency that is great to be our sponsor. That, you know, that project also seems to be moving ahead nicely. Realistically, I think it will take us to sort of December of 25 to complete the full process. You know, it's one of those things where before you get into it, everyone tells you, yeah, it's about a year.

Peter Brereton: Once you get into it, they all admit, well, actually, it's more like 18 months. And so that project is underway. Many of the agencies, by the way, have been granted additional grace period because of, you know, so many of the vendors are, it is taking all of us longer to get to true FET RAM certification. So, and in the meantime, these government agencies still need solutions. So many of the agencies have been granted additional grace periods to run non FET RAM solutions as long as the vendor is on route to FET RAM.

Peter Brereton: So, you know, overall, we think it looks pretty good. I mean, it touches not only Federal Government agencies that we have as existing clients and that we have as prospects, but it also, and you probably know this, but it also touches a lot of the big state-owned hospital networks that have decided to adopt either what's called FET RAM, which is really a version of FET RAM, put out by the state of Texas, or FET RAM.

Peter Brereton: And a lot of them are taking the position that you can be either as long as you're either FET RAM or FET RAM, you know, they can deploy your platform. So, we're tracking pretty well and we'll be ramping up investment in it over the next, I mean, starting now, but it'll really ramp up through the year and probably reach sort of full investment level by Q4, Q1, and Q1 of next year. Okay, thanks for the colors and pop along. Thanks, John. Ladies and gentlemen, as a reminder, should you have a question, please press one, star one, sorry.

John Shah: Thanks for the colors and pop along. Thanks, John.

Operator: Ladies and gentlemen, as a reminder, should you have a question, please press star one, sorry.

Suthan Sukumar: Your next question comes from Suthan Sukumar with Suthan, your line is now open. Good morning, Jeff. For my first question, I wanted to touch on the looking strength this quarter. Can you speak a little about where you're strength today, what was the mix between the different markets and how much of that is starting to be driven through the partner channel? I think that's a marked question. Yeah, sure. So Suthan, I think we had a good, we had actually a good mix across healthcare and complex distribution here.

Suthan Sukumar: Your next question comes from Suthan Sukumar with Speedful. Your line is now open.

Suthan Sukumar: Good morning, Jeff. For my first question, I wanted to touch on the looking strength this quarter. Can you speak a little about where you're strength today? What was the mix between the different markets and how much of that is starting to be driven through the Partner Channel? I think that's a Mark question. Yeah, sure. So Suthan, I think we had a good, we had actually a good mix across health care and complex distribution here. Health care slightly led the way, but a really solid performance from complex distribution in that mix. I think Peter mentioned in his comments, we had, we did have any logo and distribution, so pretty excited about that.

Suthan Sukumar: Healthcare slightly led the way, but a really solid performance from complex distribution in that mix. I think Peter mentioned in his comments, we did have any logo and distribution, so pretty excited about that. And in healthcare, it was really a mix of some good expansion stuff and a pretty significant migration from an existing customer.

Mark Butler: And in health care, it was really a mix of some good expansion stuff and a pretty significant migration from an existing customer. So it was kind of a pretty good mix across the board. From a partner perspective, where are partners playing a more important role in terms of driving growth? Is it really in the health care space, or really across the board? Yeah, it's a mix, but definitely it's more important for us in the health care space. If you look at where the pipeline influences from a dollar perspective, it's certainly tipped toward health care. We have more SIs and larger SIs that have been involved with us in projects on that side.

Mark Butler: So it was kind of a pretty good mix across the board. You're good. And from a partner perspective, where are partners playing a more important role in terms of driving growth, is it really in the healthcare space or really across the board? Yeah, it's a mix, but definitely it's more important for us in the healthcare space if you look where the pipeline influences from a dollar perspective. It's certainly tipped toward healthcare.

Mark Butler: We have more SIs and larger SIs that have been involved with us in projects on that side. We do have some smaller SIs that are really very active with us on the complex distribution side. And actually, there's some of those in particular, one in particular, that actually in terms of an end project delivery capacity is very far along the line. So that's kind of the mix of what we see from the partners.

Mark Butler: We do have some smaller SIs that are really very active with us on the complex distribution side. And actually, there's some of those in particular, one in particular, that actually, in terms of an end project delivery capacity, is very far along the line. So that's kind of the mix of what we see from the partners. And the level of influence there is, I think Peter mentioned in his comments about a third of the pipeline over the last 12 months has been influenced by partners. And when you look at wind rates, you know, you look at the deals that we actually win.

Mark Butler: And the level of influence there is, I think Peter mentioned in his comments about a third of the pipeline over the last 12 months has been influenced by partners. And when you look at wind rates, you look at the deals that we actually win, the level of partner involvement in one deals is even higher. It's around 50%. Okay. Great. Great color. On the data strategy, I think that's some encouraging comment or just giving some of the opportunities and some of the early traction that you're seeing there.

Mark Butler: The level of partner involvement in one deal is even higher. You know, it's around 50%. Okay.

Mark Butler: Great. Good color. On the data strategy, I think that's an encouraging comment or just given some of the opportunities and some is to say net new area of investments for the company. and it is just a sort of a reallocation of existing spendent. And how should we think about really the opportunity here? Is this really designed to be a product upsell opportunity, or is there a more broader product and services consulting type offering that you can take to your clients?

Mark Butler: It's a net new area of investment for the company, and or it is just sort of a reallocation of existing spending. And how should we think about really the opportunity here? Is this, you know, is this really designed to be a product upsell opportunity, or is there, or is there not any difference kind of a more broader product in services consulting type offerings that you can take to your clients? Sorry, you're referring to the data initiative?

Mark Butler: Sorry, you're referring to the Data Initiative? Yeah. Yeah, I mean, we're seeing it as, I mean, we're seeing it as impacting several areas of the business. One is we think it will impact new account win rate and general distribution. You know, there's a lot of hype these days about AI and AI capability and how you're taking advantage of the data and the system to help decision makers sort of make key decisions. And we think this, you know, this will be a very competitive new account offer. You know, from the standpoint of the, you know, how we roll it out, we're seeing it as a combination of, you know, an additional SaaS offering that would spend right across our, you know, our various verticals from general distribution and, you know, even some of the healthcare distribution right over into, you know, the hospital space, including pharmacy, general supplies, et cetera.

Mark Butler: Yeah. Yeah, I mean, we're seeing it as, I mean, we're seeing it as impacting several areas of the business. One is we think it'll impact new account win rate and general distribution. You know, there's a lot of hype these days, but AI and AI capability and how you're taking advantage of the data and the system to help decision makers sort of make key decisions. And we think this, you know, this will be a very competitive new account offering, you know, from the standpoint of the, you know, how we roll it out, we're seeing it as a combination of, you know, an additional SaaS offering that would spend right across our, you know, our various verticals from general distribution and, you know, even some of the healthcare distribution right over into, you know, the hospital space, including pharmacy, general supplies, et cetera.

Mark Butler: So it'll be a very broad-based approach. You know, will it drive additional consulting? We expect, though, that our partners will pick up a lot of that consulting. It's a classic sort of kind of consulting that partners love to engage in and are well equipped to engage in. So we expect to provide the platform to do some of the consulting, but have a good percentage of the consulting handled by partners. Okay. Great. Thanks.

Mark Butler: So it'll be a very broad-based approach. You know, it will drive additional consulting. We expect though that our partners will pick up a lot of that consulting. It's a classic sort of kind of consulting that partners love to engage in and are well equipped to engage in. So we expect to provide the platform, do some of the consulting, but have a good percentage of the consulting handled by partners.

Suthan Sukumar: Okay, great, great, thanks.

Suthan Sukumar: And the, we won't have questions from you guys.

Peter Brereton: And the, you know, the last question for me, guys. I'm on the healthcare side. Give it an update on what you're seeing from a competitive standpoint. You know, it looks like you, you guys are still competitive position here well. And just kind of curious on what you see in the backdrop. And with respect to expansions, you know, a really good commentary here on the pharmacy opportunity. But what does a typical expansion look like for one of your healthcare networks? And how is that pace of expansion playing out with some of the key market accounts that you landed over the years?

Suthan Sukumar: I'm on the healthcare side to give you an update on what you're seeing from a competitive standpoint. You know, it looks like you guys are still competitive position here well. And just kind of curious on what you see in the backdrop.

Peter Brereton: And with respect to expansions, you know, a really good commentary here on the pharmacy opportunity, but what does a typical expansion look like for healthcare networks and how does that pace of expansion to be playing out with some of the key market accounts that you've landed over the years? Yeah, I mean, it's a great question. And it's, you know, there's no one simple answer to it. I mean, we, you know, we look for champions of change throughout the market.

Peter Brereton: Yeah, I mean, it's a great question. And it's, you know, there's no one simple answer to it. I mean, we, you know, we look for champions of change throughout the market. And, you know, we can't, you can't just sort of sell, you know, these various add-ons and upsells and cross-sells. You can't, you can't sell them to a network that doesn't want to change. So, so we tend to look for champions of change. There is a wave running through pharmacy right now as a lot of younger pharmacists are now sort of taking over as Chief Pharmacy Officers.

Peter Brereton: And, you know, we can't, you can't just sort of sell, you know, these various add-ons and upsells and crosssells. You can't, you can't sell them to a network that doesn't want to change. So we tend to look for champions of change. There is a wave running through pharmacy right now as a lot of younger pharmacists are now sort of taking the, you know, taking over as chief pharmacy officers and, you know, they're not content with the way pharmacy has run for the last number of years.

Peter Brereton: And, you know, they're not content with the way pharmacy has run for the last number of years. And so they're, they're looking for, you know, platforms that can support change. So, you know, we're obviously all over that. In the, in the general supplies area, we continue to have competition. I mean, Cardinal competes in the OR, you know. GHX competes to some extent in general supplies. So we have competition in those areas. But we continue to be in a position where, if a network really wants an end-to-end platform and says, well, you know, maybe I'm starting in general supplies.

Peter Brereton: And so they're, they're looking for, you know, platforms that can support change. So, you know, we're obviously all over that. In the, in the general supply area, we continue to have competition. I mean, Cardinal can compete to the OR, you know, GHX competes to some extent in general supplies. So, so we have competition in those areas, but we continue to be in a position where, where if a network really wants an end-to-end platform and says, well, you know, maybe I'm starting in general supplies, but my long-term vision is that a single platform that covers every type of supply chain within my network.

Peter Brereton: But my long-term vision is that a single platform that covers every type of supply chain within my network. Then, you know, we're still the only game in town. And we continue to, in fact, deepen that mode. I mean, just rolling out of pharmacy is another significant expansion of the mode, you know, protecting that, protecting that space.

Peter Brereton: Then, you know, we're still the only game in town. And we continue to, in fact, deepen that mode. I mean, just rolling out pharmacy is another significant expansion of the mode, you know, protecting that, protecting that space.

Peter Brereton: And so, we continue to be in a position where we continue to be in a position where we continue to be in a position where we continue to be in a position where we continue to be in a position where we continue to be in a position where we continue to be in a position where we continue to be in a position where we continue to be in a position where we continue to be in a position where we continue to be in a position where we continue to be in a position where we continue to be in a position where we continue to be in a position where we continue to be in a position where we continue to be in a position where we continue to be in a position where we continue to be in a position where we continue to be in a position where we continue to be in a position where we continue to be in a position where we continue to be in a position where we continue to be in a position where we continue to be in a position where we continue to be in a position where we continue to be in a position where we continue to be in a position where we continue Okay, great.

Peter Brereton: Okay, great. Thanks for the Color Gents and Pathless. Thank you. Thanks, Tim.

Peter Brereton: Thanks for the call, agents, and I'll pass by. Thank you. Thanks, Tim.

Operator: I don't know for the questions at this time, I will not turn the call over to Peter for closing remarks. Great. Thank you everyone for joining us today and taking the time to get this update on Q1. We will have Q2 results later in the fall. And in the meantime, if you have additional questions, as always, don't hesitate to reach out. Thanks and have a great day. Thanks.

Operator: I don't know for the questions at this time.

Peter Brereton: I will not turn the call over to Peter for closing remarks.

Peter Brereton: Great. Thank you, everyone, for joining us today and taking the time to get this update on Q1.

Operator: We will look forward to talking to you with our Q2 results later in the fall. And in the meantime, if you have additional questions, as always, don't hesitate to reach out. Thanks and have a great day. Thanks.

Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.

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