Q3 2025 Tecsys Inc Earnings Call
Speaker Change: Good morning everyone, welcome to Tecsys' third quarter fiscal year to 2025 results conference call.
Speaker Change: Please note that the complete third quarter report, including MD&A and financial statements, were filed on Cedar Blast after Market Close yesterday.
Speaker Change: 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 their website at www.texys.com-investors.
Speaker Change: Some of the statements in this conference call, including the question and answer period, may include forward-looking statements that are based on management's buildings and assumptions. Actual results may differ materially from such
Speaker Change: I would like to remind everyone that this call is being recorded on Thursday, March 60, 2025 at 8.30 a.m. Eastern Time.
Speaker Change: I would now like to turn the conference over to Mr. Peter Brereton. She is executive officer at Texas. Please go ahead, sir.
Speaker Change: Thank you and good morning everyone. Joining me today is Mark Bentler, our Chief Financial Officer. We appreciate you joining us for today's call.
Speaker Change: We continue to see strong SaaS revenue growth of 29% year-to-date and up 22% for the quarter, which together with other revenue streams, including professional services, contributed to a record revenue quarter of over $45 million.
Speaker Change: Meanwhile, SaaS bookings were diversified across markets and geographies, and we saw continued positive growth in our RPO now sitting at 210 million.
Speaker Change: Between new logos, renewing and expanding base accounts and continued migration momentum, we are seeing sustained indicators of business health, reflecting steady progress toward our long-term value creation goals.
Speaker Change: I'd like to take a moment to summarize the key events of Q3 for fiscal 25. Mark will then walk us through the financial results in more detail. And finally, I'll comment on our outlook followed by a Q&A session. If you're following along on our companion presentation, I'll be speaking to slide three.
Speaker Change: Our third quarter builds on solid fiscal performance today. We're looking at record quarter and year-to-date total revenue and SaaS revenue, solid bookings at 4 million for the quarter, which while down compared to Q3 last year is up 31 percent on a last 12-month
Speaker Change: and a strong-adjusted EBITDA up 34% compared to last year. Our performance this quarter reflects strong business activity with notable momentum in healthcare.
Speaker Change: This includes two new health system wins, one in the US and one in Canada. We also added another US health system a few days after quarter end.
Speaker Change: We signed two major migration deals across healthcare distribution and health systems as well as various expansion deals as we continue to show value once we are into an account.
Speaker Change: We continue to see growing demand for our pharmacy solutions with healthy pipeline activity driven by General Market Appetite, the SCSA regulatory pressures and a growing role at X of Texas customers who are looking at their pharmacy operations as a next strategic focus.
Speaker Change: Over the past few quarters, I've mentioned our focus on expanding user groups.
Speaker Change: and industry workshops. This effort is showing excellent momentum in the pharmacy market particularly where we're currently promoting our upcoming pharmacy supply chain leadership summit in Philadelphia with five customer speakers and a good mix of customers and prospects registered.
Speaker Change: We are actively engaged with our customers in finding ways to highlight the impact of Texas within their organizations. Since our last call, recent collaborations have included a webinar with Mayo Clinic and promotion of a pro-MAT session with Texas Children's Hospital, reinforcing our standing as a trusted partner in the healthcare supply chain.
Speaker Change: and cementing our position as the supply chain software provider for the healthcare market.
Speaker Change: We continue to see some notable activities in the General Distribution Mark. Last month, we announced new customers, Shadlow Jesko and Kirby Risk, have joined a growing list of electrical distributors, Seleckel, Texas.
Speaker Change: They join Warner Electric and others in adopting a WMS that is purpose-built with specialized functionality like wire cutting.
Speaker Change: I'd like to highlight as well how our growing partner ecosystem continues to drive the impact with Avalon playing a role in both of these new accounts.
Speaker Change: More broadly, partners are influencing a significant portion of our pipeline, lens and roll-edge with approximately a quarter of our deals involving partner collaboration.
Speaker Change: On the technology front, our partner engagements are also developing. In January , we announced the Word of Dynamics connector for Shopify to help Shopify merge and streamline the Word of Management and fulfillment processes, enhancing inventory visibility, improving order routing, and increasing fulfillment efficiency.
Speaker Change: Across the board, our work with partners like KPI Digital, Avalon CSE, Shopify, and others are helping to create our market, accelerate our market access and grow our reach in the market.
Speaker Change: Regarding market conditions, we're keeping a close eye on the international trade tensions landscape on both sides of the border. Right now we don't anticipate any material impacts on our business. We continue to gain traction across geographies and we'll continue to monitor the situation.
Speaker Change: Additionally, we've continued to buy back shares under our normal course issue of bid, spending 1.7 million on share by Vax and Q3.
Speaker Change: and so as we continue to invest in the products we sell, and in our go-to-market strategy, Texas is proving to be among the best cloud-based solutions available in the markets we serve. The steady growth we have experienced affirms our vision and strategy for shareholder value.
Speaker Change: Mark will now provide further details on our third quarter and year-to-date financial results as well as some financial guidance on key metrics.
Mark Bentler: Thank you, Peter. I'll start with Slide 4 and focus first on SAS.
Sass revenue growth was 22% reaching $17.3 million.
Speaker Change: Recall last year in Q3, we had a one-time revenue recognition of approximately $700,000.
Speaker Change: to the completion of a product performance obligation. Normalizing for that, growth in Q3 would have been about 28 percent.
Speaker Change: As Peter mentioned, Q3 was a record total revenue quarter at $45.2 million. That's up 3% from the same quarter last year, but if you exclude hardware, that growth was 9%.
Speaker Change: Professional Services Revenue for the third quarter was $13.9 million. That was up 7% from last year. We anticipate that professional services revenue will remain variable, influenced by the timing of project deliveries and the level of involvement from integration partners.
Speaker Change: That said, Q3 was also a record quarter for professional services bookings which came in at 24.4 million. That was up 170% from the same quarter last year. Our professional services pipeline is now at a record level.
Speaker Change: For the third quarter of fiscal 25, gross margin was 47%, compared to 45% in the same period last year.
Speaker Change: The key drivers here are increasing SaaS margins, as well as shrink the professional services margins in the Gorgon.
Speaker Change: Net profit in the quarter was $1.2 million compared to $759,000 in quarter last year.
Speaker Change: Basic and fully diluted earnings per share were 8 cents, and the current quarter could have put a 5 cents in the prior quarter.
Speaker Change: Ajusted EBITDA was $3.5 million in Q3 fiscal 2025, compared to $2.6 million, the same last year.
Speaker Change: Turning briefly to our year-to-date highlights, and that's slide five in the companion deck.
Speaker Change: Sass revenue for the first nine months of fiscal 25 was $48.7 million. That's up 29% from the same period last year.
Speaker Change: Our total revenue reached $129 million, but 2% increase from last year.
Excluding Hardware, Revenue Group by 10%
Speaker Change: For the first nine months of fiscal 25, our adjusted EBITDA increased to $9.1 million. That's up from $6.8 million in the same period last year. And that's a 33% year on your increase.
Speaker Change: Fully diluted earnings per share for the first nine months of this year were 18 cents compared to 11 cents in the same period last year.
Speaker Change: We ended Q-3 with a solid balance sheet. We had cash and short-term investments [inaudible]
David Brereton, David Brereton,
and no debt.
Speaker Change: As Peter mentioned, we used about 1.7 million of cash in the quarter to buy back shares under our NCID, and additionally, the board yesterday approved a quarterly dividend of eight and a half cents a share.
Turning to Financial Guidance on Slide 6
and adjusted even a margins of eight to nine percent.
Speaker Change: For Fiscal 26, we're maintaining guidance for Adjusted EBITDA of 10-11%.
Speaker Change: We saw a strong Q3 2025 professional services bookings, and you're today growth in SaaS bookings.
Speaker Change: However, the timing of these bookings is expected to result in full-year fiscal 25 EBITDA margins and fast revenue being at the lower end of our guidance range.
Speaker Change: Based on actual third quarter hardware shipments and visibility into overall fourth quarter revenue, we're raising fiscal 2025 total revenue growth guidance from flat to 1 to 3% growth.
Speaker Change: and we expect to provide fiscal 2026 guidance with our Q4 and full-year fiscal 2025 earnings release.
Peter Brereton: I'll now turn the call back to Peter to provide some outlook comments.
Peter Brereton: Thanks, Mark. Tecsys' third quarter results reflect the consistent execution and momentum that we've built. Our solid footprint in key markets reinforces our confidence that we are well positioned to upsell and cross-sell within healthcare.
Peter Brereton: Our value proposition and pharmacy is compelling. There's heightened interest in this area and we believe we are uniquely positioned to capitalize on this opportunity.
Peter Brereton: We continue to see this as an important growth engine for us.
Peter Brereton: Our converging and general distribution business also represents a substantial market opportunity. We are pursuing new marketplaces and geographies within this space.
Peter Brereton: We are pleased that our pipeline is robust and we continue to see strong buyer intent across our verticals. In the coming months, in addition to hosting that pharmacy supply chain leadership summit in Philadelphia, we are making a big showing at ProMAD in Chicago and gearing up for what
Peter Brereton: Our line-up there ranges from longtime Texas testers, like LK Packaging, AMG Medical and Trinity Health alongside newer customers like Nissan and Acuristics.
Peter Brereton: With strong market momentum behind us, we have an exciting opportunity ahead.
Peter Brereton: As mentioned earlier, we are monitoring current international trade tensions and will adjust course should those impacts become material. For now, we'll continue to invest to drive growth in a market that is changing, changes that are spurred by aging legacy systems, digital adoption, and shifting geopolitical landscape.
Peter Brereton: We often see change acting as an accelerant for supply chain transformation, so we will find those opportunities and capitalize on them as they emerge.
Peter Brereton: 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 that it is easy to use and upgrade and even easier to recommend to peers.
Peter Brereton: Second, a continued strategic partnership approach allowing us to tap into new opportunities and fuel our scalability around the world. Third, we are committed to harnessing the full potential of data to drive value and innovation across our solutions.
Peter Brereton: Now, final point I'd like to stress, across our markets we will 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 then expand on the value delivered.
Peter Brereton: With that, we'll open the call-up for questions. Thank you.
Peter Brereton: Thank you. Ladies and gentlemen, we will now begin the question and answer session.
Peter Brereton: Should you have a question? Please press the star, follow the number one on your touch phone. You will hear a prompt that your hand has been raised.
Peter Brereton: Should you wish to decline from the polling process, please press the star followed by the number two. If you're using a speaker phone, please lift the handset before pressing any keys.
One moment, please, for our first question.
Peter Brereton: Our first question comes from Amr Ezzat of Ventum Capital Markets. Please go ahead.
Good morning, Peter and Mark. Thanks for taking my questions.
Amir Ezzat: Can you give us a bit more color on the growth of this quarter? First you mentioned two IDN when I wonder are these?
Amir Ezzat: Pharmacy-focused clients, then secondly, I'm trying to get a decent of how large these new logos are, is your 650K average deal size.
I give a assumption to make.
I'll share anything. First of all, I'll comment on the...
Amir Ezzat: The types of accounts right now, I will tell you this is absolutely typical for every time we've expanded into a new area of hospitals.
Um...
The Pharmacy Pipeline.
Amir Ezzat: Is I think there's many accounts in the pharmacy pipeline that are waiting to see how the these this next wave of go-lives go so we have a wave of go-lives that are just
Amir Ezzat: We're getting near to the finish line now. We have one that went live in January , a couple that are supposed to go live in March or April , and we know we have a number in the pipeline that are waiting to see how those go, so these were not pharmacy deals.
in terms of the yield size.
Amir Ezzat: These would have been, I think, Mark, a little below average, right, if you can average those two?
Mark Bentler: Yeah, very slightly below average. I mean the overall average of Amr is holding like if you look through the year and if I look through our Q4 pipeline and so on that overall average is holding quite well but I think these two deals would have been a little bit below average.
Speaker Change: Okay, that's helpful. On the pharma, I think it was last quarter when you said, like, a third of your pipeline is pharmacy. I just wonder if they're way to quantify.
How much pharmacy contributes to staff's revenues today?
Speaker Change: Or, you know, total revenues today and how do you sort of see that evolving in three or four years given how large this pipeline is? Do you expect it to go to a third of your revenues or a third of your SaaS revenues, eventually?
Speaker Change: Is it, yeah, I mean, is it reaches a more mature run rate over the next few years? I would, I think you're spot on. It should logically reach about a third of our total hospital revenue. You know, if you look at where it's at today, it would be...
Speaker Change: I'm sort of shooting off to stop my head here, but I would put it at less than...
Speaker Change: Maybe five, six percent. I mean, it's just getting more, right? Yeah. Would you agree, Mark? It's in that range, right? Yeah, yeah, definitely less than 10 percent. Yeah.
Speaker Change: Okay, that's that's that's quite helpful. Um, then maybe a conceptual one. Um, of the ideas that came to you specifically for pharmacy
Speaker Change: So, exclusively, I guess, for pharmacy. Have any expanded or, I guess, in discussions to expand into other solutions or do you expect these to remain pharmacy only client? I'm just trying to get a sense of
Speaker Change: How the expansion road map for pharma customers compares to those who start with your core healthcare offering.
Speaker Change: Yeah, it's a great question. We just don't have enough history to answer that question yet. Like the first two that we did, one of them has remained pharmacy, but we expected them to. They're small sort of university hospital network.
Speaker Change: The second one we did was already a general supplies and, you know, CSE and point of use they added pharmacy.
Speaker Change: The ones that have come on since that have come to us just for pharmacy.
Speaker Change: As I say, they're just going live now, so if it follows a typical pattern, they'll want to be live and stable. Typically they end up wanting to be live and stable for sort of a year or so.
Speaker Change: before they're ready to cycle back and look at, you know, starting out on other areas of the hospital. So we'll start, you know.
Speaker Change: Like I'm assuming that they will expand into other areas as, you know, most hospitals network seem to, but we will really only know that probably about a year from now.
Speaker Change: Okay, I'll ask you again in a year, I guess. I'll pass the line. Thank you. Thanks, Anna.
Speaker Change: Thank you. Our next question comes from Gavin Fairweather of Cornmark Securities. Let's go ahead.
Gavin Fairweather: Well, hey, good morning. Thanks for taking my questions. Appreciate the intro comments in terms of the health care momentum that you're seeing in the pipeline, maybe just in terms of the political environment. I remember during the first. [inaudible]
Gavin Fairweather: Administration, all the threats around affordable care are led to some deals pushing, and we've seen some headlines around.
Gavin Fairweather: Potential Medicaid cuts here recently. So curious what you're hearing from your health care customers on that front and and how you're planning to maybe adapt your go-to-market motions in case there is some disruption there.
Gavin Fairweather: Yeah, we're having to really just sort of watch it along with all the rest of you, and trying to figure out where this is going. I mean there's so far there is very, very strong political support in Congress for not touching Medicaid.
Gavin Fairweather: But that's probably the one area of sort of potential risk. A lot of hospitals have a fair number of Medicaid customers and Medicaid-funded customers.
Gavin Fairweather: You know, so, you know, they would be sensitive to a revenue hit.
if Medicaid were to get substantially slashed.
Gavin Fairweather: in U.S. Public Cloud Infrastructure, and we simply open up access to it from there. So we don't expect any issues on the tariff side. So it would really come down to the impact on Medicaid. And as I say, so far that's been treated as.
Gavin Fairweather: Sackershank. So, that's the one we're keeping on. I mean, the beauty, of course, to SaaS and the whole SaaS world is that it is recurring revenue. So, if we did hit a slow down with a sudden adjustment to a lower Medicaid pay-over rate or whatever, there's no question it would hit new bookings.
Gavin Fairweather: But it really wouldn't hit existing revenue, so we would have to adjust our investment in sales and marketing and decide what to do based on what the actual booking rate looked like.
Gavin Fairweather: But at this point, we don't anticipate any, and certainly the feedback from our healthcare clients right now is full speed ahead.
Speaker Change: That's great to hear and that does tell us well into my next question just in terms of the healthcare pipeline. How does that look? I think in the intercom, if you talked about a strong pipeline, but specifically in healthcare, how does that look and how does it break down between expansion versus kind of new ideas?
Speaker Change: Yeah, it's rough numbers right now. Mark can correct me here. We were just like those numbers yesterday. The overall pipeline and health care off of about 20% from last year and break down right now, if I remember rightly, is what Mark? Two-thirds new, one-one-third base.
Yep, that's right.
Speaker Change: Yeah, it's fairly heavily dominated to the new side or skew to the new side right now. And, you know, the challenge always with pipeline is you may be aware is you not only have to measure pipeline size, but also have to measure pipeline velocity.
Speaker Change: and you know, coming out of calendar 23 when they were all losing money or most of them were losing money, pipeline velocity was quite slow in calendar 24.
Speaker Change: You know, they've now been making money for over a year, most of them are cash flow positive. And as they are, the pipeline velocity seems to be accelerating.
Speaker Change: You know, right now we're trying to figure out what the bookings are going to look like for next year. There's obviously a lot of moving parts to that. I mean, we've already talked to the political landscape.
Speaker Change: We'll see, but it seems like the velocity is moving in the right direction as well as the size of the pipeline.
Speaker Change: I appreciate that I can do here, and then maybe, I don't know, I'm just to take this other Mark for Peter, but on the professional services, very impressive booking this quarter, I think you previously said you were planning to keep the size of the team roughly flat, I guess I'm wondering if that's still the case, or...
Speaker Change: and you're just going to run kind of PS utilization at 90% for a few quarters and what would that kind of imply for quarterly bellings and the PS gross margins?
Speaker Change: Yes, we've said before at the current staffing levels, we sort of feel like, you know,
You know, 14 to 15 million, it'll pushing up the $50 million P.S. revenue quarters kind of taps us out.
Speaker Change: So we're actually, you know, we're actually looking at this pretty carefully to figure out.
Speaker Change: You know, when it's time to start adding new, you know, new talent there, it's kind of...
Speaker Change: We, it takes a little while to get, you know, people up to speed there. We also have to be sensitive to the fact that, you know, we do have a this ecosystem that's developed quite nicely over time.
So we want to make sure that
Speaker Change: You know, there's professional services work that we could pass around the right circumstances to some of our partners.
Speaker Change: You know, as that, as that PS we're having a number starts to creep up, you know, we're 14 and then pushes up towards 15, 9, a quarter we're gonna we're gonna need to start adding heads
Speaker Change: Okay, appreciate that. And then lastly, for me, probably for Mark.
Speaker Change: What effects are going to be assumed in your physical 26-margin guidance that you've provided and maybe can remind us how the hedge is errolling over the next few quarters?
Speaker Change: Yeah, we're pretty, we're pretty hedged out there, you know, the comp on a comp basis.
Substantially hedged in 26 and 27.
and those hedges are in the 135-136 range, so...
Speaker Change: which is kind of where we've been the last two years on hedge value. So we kind of expect that, and what we've tried to do is take the FX noise out of.
Speaker Change: You know, out of that trend and like I said, we're very hedged on that exposure so that's what we expect to be happening.
Okay, I'll pass the line. Thanks so much.
Thank you.
Speaker Change: Thanks, Gavin. Thank you. We also have another question from John Cho of National Bank. Let's go ahead.
Good morning guys, thanks for taking my question.
Speaker Change: I mean, overall, John , there was one deal in the quarter, which was...
Speaker Change: You know, definitely quite large. It was actually an existing long-term client of ours that signed
Speaker Change: to migrate from the old-on-prem perpetual license to a new SAS.
Speaker Change: Our New SAS Infrastructure, and that came with a fairly substantial pro-services engagement. The rest of them were pretty normal, and the funny is even if I knocked out that.
Speaker Change: It was still a home run from a PSY night, but even if I take that one right out.
Speaker Change: It was still a very strong PS Booking Quarter, so, you know, and the rest of the Bookings were as a pretty normal, you know, they were...
Speaker Change: You know, PS bookings for expansions and add-ons and you know in some cases upgrades and...
and so on, so...
It, uh...
Speaker Change: You know, again, some of this, I think, is just a delayed effect from what I mentioned earlier. The hospital networks had run for a period of time, cashful and negative, and they were ratcheting back all their spend on, you know, and consulting services. I mean, they were cutting back wherever they could either through that. They're out the other side. They're trying to accelerate their transformation. [inaudible]
Speaker Change: There's a lot of pressure around data as well, cleaning up data to make sure that...
Speaker Change: You know, I mean everyone's trying to figure out how to truly harness AI and what they're all finding is that if your data is...
is poor.
Speaker Change: A.I. is useless. So there's a lot of focus on sort of cleaning up the data. Some of our latest releases have a lot of A.I. capability on them for cleaning up the item master file and related files. So, you know, that's driving some movement forward. So there's...
Speaker Change: There's sort of a lot of tailwinds in there, but there was, you know, one, you know, fairly substantial deal that definitely skewed it even higher.
We've got it and that's great colors.
Speaker Change: There's always something else in there too. There's always something else in there too, right? I'm like, you know, whether it closes at one quarter, the next quarter, you know, on Q2, we had...
Peter Brereton: You know, professional services that were actually, you know, they were actually down, um, compared to the same period last year. So some of this is just like the timing of how that happens, but even if you saw for that, it was, uh, as Peter said, it was a, it was a home run quarter.
Speaker Change: Thanks. So my understanding the company has been delegating P.S. works to a partner, so any change is to that strategy given, you know, that quarter is storm bookings.
Speaker Change: We continue to work with our partners and the partners get involved at all stages. I mean, we have partners where...
Speaker Change: You know, a lot of their work is done before we even get involved in the account. We have other partners that only come in sort of after we've landed an account.
Speaker Change: and some of the more focused are really experts on our products and can do almost all of the work. Others are sort of especially the larger size.
Speaker Change: are more focused on the overall project management and, you know, integration work and testing and...
Speaker Change: That kind of thing. So we've got the whole spectrum, but there's no real change to approach here. We do occasionally sub some workout to some of our partners if we get overloaded and occasionally sub workout to us if they get overloaded.
Speaker Change: So it's quite a collaborative environment between us and our partners.
Speaker Change: Thanks for the colors. And in terms of your complex distribution business, you know, there has been a lot of noise on an automobile supply chain and ultimately and given your exposure to that market, what do you hear from the customers and any implications to your business at this point?
There's been the impact yet.
Speaker Change: You know, I find it hard to believe that there won't be in some sectors. You know, there's just so much certainty on certainty. I mean, you know, how do you do any long term planning in this kind of environment? It's fundamentally impossible if you're in a kind of business that is affected by tariffs.
Speaker Change: So, you know, I expect there will be some impact at the same time if I look at the areas, the markets that...
Speaker Change: have been performing well for us in the last year. They are virtually unaffected and still doing really well. You know, we mentioned on the call a couple of electrical distributors we've just signed.
Speaker Change: Well most electric distributors buy local, they're buying product made in the U.S., they're holding it and selling it to customers that are in the U.S. for construction that's done in the U.S. So in that case they're completely unaffected.
Speaker Change: So we will, I mean complex distribution has always been what I've sometimes described as a heat seeking business. It's more of a horizontal than a vertical. And part of the trick is to constantly be analyzing the landscape and figuring out where the hotspots are and going after that hotspot.
Speaker Change: You know, some of the hotspots lately have been mentioned electrical and other one is drugs. You know, we've done a lot of business and drugs in the general distribution business, which of course is somewhat related to our hospital health care business, we're not entirely. You'll notice in the latest investor deck actually that we just put out. [inaudible]
Speaker Change: We've added some clarity around that in the slide that shows the mix of clients. You know, we used to sort of define healthcare as just hospitals.
Speaker Change: But we've decided to more broadly define healthcare because they do interact, you know, they both require in some cases DSCSA compliance, they both require the same track and trace capability and so on, so we've we've lumped together now sort of the full end and healthcare supply chain. and so we've we've we've we've we've we've
from, you know, from basically
Finished Goods [inaudible]
Speaker Change: all the way through to patient bedside, and we're defying it that way. And on that basis, healthcare represents 76% of our SaaS revenue, so you can see that the strength in that market, in general distribution market, is also to a significant extent, healthcare-powered.
Speaker Change: Okay, maybe one last question from me. On your hardware business, it's a nice rebound from last quarter, just wondering if that business will be subject to care if you sell into your U.S. customers.
Speaker Change: That business, some of that business will be, you know, at least at this point. The proprietary technology that we actually manufacture, we, you know, or subcontract the manufacturing, that is currently done in Quebec. So that would be subject to tariff. A lot of the rest of that business is.
you know, can be...
Speaker Change: It's hard for the product that we buy every sell and we can buy it in the US and sell it in the US so I think that you know that will be less effective. Thank you.
Speaker Change: But even some of that stuff, of course, is manufactured in China, for instance. And now there's 20% tariffs coming in on that. So there are going to be some price adjustments right across the board in the area of hardware.
Speaker Change: You know, at the same time, people still need hardware, so it may just keep right on moving, we're not sure.
Thanks for the color of the possible money.
Great, thanks. Thanks, John.
Speaker Change: Thank you. We also have a question from Suthan Sukumar of Stifil. Let's go ahead.
Thank you for watching!
Suzanne Skumar: Good morning, Gents. For my first question, I want to ask, what percentage are you currently at in your customer base migration to SAS?
Suzanne Skumar: and what incentives do you have here to expedite this? And what's the typical revenue uplift on these migrations?
Speaker Change: Yeah, so, I mean, I think Suthan, thanks for the question. The way we look at that is, you know, between the two markets and healthcare, we're quite far along in our migration to
Suzanne Skumar: The number of, the number of, you know, face customers left that are on-prem and that.
Suzanne Skumar: and that vertical is getting pretty small. On the complex side, the more traditional complex side, there's quite a bit more on-prem customers that are left that we still work on and the tail on that will.
Suzanne Skumar: You know, it'll be still multiple, multiple years, multiple years long on that side.
When we sell, when we sell fast to those on-prem customers
Suzanne Skumar: We typically get about a two and a half times uplift on revenue, so maintenance, a customer paying a hundred of maintenance is going to pay something like 250.
Suzanne Skumar: on SAS. That's the general rule of thumb. It varies quite a bit because quite often times when they're going to migrate up to the next generation of...
Suzanne Skumar: Quite often times there's other things motivating that which could mean expansion of functionality etc. That would have a positive impact on that multiple, but we typically think about that as a two and a half times.
Okay.
Okay, great.
Speaker Change: on the distribution business, specifically, you guys mentioned you're moving into new markets. Can you speak a little bit about that strategy? Is that pushing into new end markets or
Speaker Change: Geographies, and from a roadmap perspective, product roadmap perspective, what are you guys prioritizing today?
Speaker Change: Yeah, the first question I mean, from a geography standpoint, it's really an effort to sort of continue to crack open more of the European market. I mean, the European market is lower right now.
Speaker Change: The funding is Denmark where our office is the overall GDP growth is quite strong, but most of that is powered by a Zemphacadle Govy, you know, drug home runs that are, you know, that company's headquartered there, so.
Speaker Change: So aside from that GDP growth across Europe is fairly low right now, but we're still seeing some interest and some opportunity, particularly again in the end-end healthcare supply chain market.
Speaker Change: and I focus an effort around that right now to try to expand more of the global footprint there. From the standpoint of our roadmap, you know, a couple of different areas we're focused on, I mean, we continue to invest heavily in pharmacy, there's still a lot of work to be done there, you know, every time we...
Speaker Change: Sort of work with a new client. We end up learning a few more things about pharmacy and we've got a whole team that's sort of a rapid response team designed to sort of figure that out and get it into the next release. So that continues. I mentioned AI earlier. You know, we have an orient.
Speaker Change: Innovation Lab continues to focus on real world practical ways to deploy AI. There's a lot of frustration in that.
Speaker Change: in the business community right now around money that's been spent on AI with very little tangible benefit. And so we are focused on actually delivering true sustainable value off of AI. You know, we've got, we're building out the whole...
No.
Speaker Change: sort of, well it'll basically be our own LLM that'll be based on Amazon technology that allow our clients to query not only how to do things but to literally sort of...
Data.
Speaker Change: and AI powered capabilities off of that data. Those are the big areas. If you drop down to the next level, I'm sure if my product managers were listening to this call, they'd be saying, well, you're forgetting the nine other things we're also working on. But at a picture level, those are the priorities right now.
Speaker Change: The last one for me, just you know, on the on the
Speaker Change: Bookings and backlog conversions to revenue and the timing around that. Can you speak to some of the moving factors here that's underlying your guide now that's, you know, moving to the lower end of the range?
Speaker Change: Yeah, I mean, on in terms of in terms of fast revenue, you see what we're at here to date, so we're at 29%. I think I think some people
Speaker Change: I think it was easy to forget about what happened last year when we had that kind of oddity in Q3 of last year which kind of slowed down the comp growth this quarter, 22% and if you take that out it would have been 28%
Speaker Change: But all that said, we're at 29% year to date right now, and if you kind of do the math on the bookings, we just closed.
Speaker Change: You know, 4 million, it's the revenue on that chance to start.
Tim's to start pretty quickly.
Speaker Change: So it's pretty easy to do the math on the impact of that.
Speaker Change: You know, we take a forward look on, you know, what we think is going to book in Q4.
Speaker Change: The timing of those bookings are going to drive some incremental revenue into that Q4, but a lot of what we book in Q4 won't have a massive impact on SaaS revenue in the quarter.
Speaker Change: You know, it's pretty easy to sort of read the tea leaves and see kind of where we're going to fall in there and that's what that's what motivated the guidance on the lower end of.
of the range.
Speaker Change: Okay, great. Thank you for taking my questions. I'll pass the line.
Thanks for your time. Thanks.
Speaker Change: There are no further questions at this time. I would now like to turn the call back to Mr. Peter Brereton for his closing remarks.
Let's go ahead, sir
Mark Bentler: Great, thank you everyone for your time and as always if you have additional questions please don't hesitate to reach out to Mark or I and we'll look forward to talking to you sometime right around the end of June or first week of July as we release our fourth quarter results. Thanks everyone, bye for now, have a great day.
David Brereton,
Speaker Change: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.
Music Music Music Music Music Music