Q4 2025 Tecsys Inc Earnings Call
Operator: Good morning, everyone. Welcome to Tecsys' 4th Quarter and Fiscal Year 2025 Results Conference Call. Please note that the complete 4th Quarter, including MD&A and financial statements, were filed on CDER Plus after market closed yesterday. All dollar amounts are expressed in Canadian currency and are prepared in accordance with international financial reporting standards. Some of the statements in this conference call, including the question and answer period, may include forward-looking statements that are based on management's beliefs and assumptions. Actual results may differ materially from such statements.
Good morning, everyone welcome to Texas fourth quarter and fiscal year 'twenty 25 results Conference call. Please note that the complete fourth quarter, including M. DNA and financial statements were filed on SEDAR plus after market close yesterday, all dollar amounts are expressed in Canadian.
C N are prepared in accordance with international financial reporting standards. Some of the statements in this conference call, including the question and answer period May include forward looking statements that are based on management's beliefs and assumptions actual results may differ materially from such statements I would like to welcome everyone to this call.
Operator: I would like to welcome everyone that this call is being recorded on Friday, June 27, 2025 at 830 a.m. Eastern Time.
Speaker Change: Is being recorded on Friday June 27, 2025 at 830, a M. Eastern time I would now like to turn the conference over to Peter Brereton, Chief Executive Officer of Texas. Please go ahead Sir.
Operator: I would now like to turn the conference over to Peter Brereton, Chief Executive Officer at Tecsys. Please go ahead, sir. Thank you. Good morning, everyone. Joining me today is Mark Bentler, our Chief Financial Officer. We appreciate you joining us for today's call.
Peter Brereton: Thank you good morning, everyone.
Speaker Change: Joining me today is Mark Butler, our Chief Financial Officer, We appreciate you joining us for today's call.
Peter Brereton: As most of you have likely seen in the results issued last night, fiscal 2025 has been another strong year for Tecsys. SAS revenue grew 29% for the year, just shy of our 30% guidance, while our core product elite grew 32%, driven by high-quality multi-site wins and strong adoption in our core market. 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, and SAS RPO continues to grow. In health care, we added two new health system providers in the quarter and completed another large migration.
As most of you have likely seen in our results issued last night in fiscal 2025 has been another strong year for Texas SaaS revenue grew 29% for the year, just shy of our 30% guidance, while our core product elite grew 32% driven by high quality multi site wins and strong adoption in our core markets.
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 and SaaS are P. O continues to grow at health care, We added two new health system providers in the quarter and completed another large migration.
Peter Brereton: We also saw continued uptake in our pharmacy offerings as more health care organizations respond to DSCSA and look to drive efficiency and visibility through their supply chain. Distribution also saw continued growth, with multi-site deals in electrical, industrial, and healthcare distribution, and important new customer additions in both North America and Europe. Our strategy of being selective but deliberate in the markets and geographies we pursue continues to bear fruit. Notably, healthcare distribution has emerged as a dynamic vertical, with increasing demand for scalable inventory management and Drug Supply Chain Security Act-aligned logistics across the care continuum. Our pipeline is responding accordingly.
Speaker Change: We also saw a continued uptake in our pharmacy offerings is more health care organizations respond to D. S CSA and look to drive efficiency and visibility through their supply chain.
Speaker Change: Distribution also saw continued growth with multi site deals electrical industrial and health care distribution, an important new customer additions in both North America, and Europe, our strategy of being selective but deliberate in the markets and geographies. We pursue continues to bear fruit.
Speaker Change: Notably health care distribution has emerged as a dynamic vertical with increasing demand for scalable inventory management and drug supply chain Security Act aligned logistics across the care continuum, our pipeline is responding accordingly.
Peter Brereton: We also had another standout quarter in professional services. Q4 marked another record for PS revenue, and we ended the fiscal year with the largest professional services backlog in our history, at $49 million. That's up 52% year over last year. These results indicate strong ongoing demand. That said, we anticipate the professional services revenue will continue to remain variable, influenced by the timing of project deliveries and the level of involvement from integration partners.
Speaker Change: We also had another standout quarter with professional services Q4 marked another record for revenue and we ended the fiscal year with the largest professional services backlog in our history at $49 million.
Speaker Change: 52% year over last year.
Speaker Change: These results indicate strong ongoing demand that.
Speaker Change: We anticipate the professional services revenue will continue to remain variable influenced by the timing of project deliveries and the level of involvement from integration partners.
Peter Brereton: We also saw several strategic milestones since our last results call. We announced a major milestone with Roche, with our SaaS platform now being progressively deployed at over 1,000 sites globally. This rollout demonstrates the scalability of our system and reinforces the trust that Roche places in us to support their operations across multiple regions.
Speaker Change: We also saw several strategic milestones since our last results call we.
Speaker Change: We announced a major milestone with Roche with our SaaS platform now being progressively deployed at over 1000 sites globally.
Speaker Change: This rollout demonstrates the scalability of our system and reinforces the trust that Roche places in us to support their operations across multiple regions.
Peter Brereton: On May 1 of 2025, we announced the establishment of a new subsidiary in India as part of an asset acquisition that included the hiring of an India-based team. This acquisition enhances our development and support capacity and capability, positioning us for long-term scalability and growth.
Speaker Change: On May one of 2025, we announced the establishment of a new subsidiary in India as part of an asset acquisition that included the hiring of an India based team.
Speaker Change: This acquisition enhances our development and support capacity and capability positioning us for long term scalability and growth.
Peter Brereton: As we continue to build momentum in the market, we also saw validation of the capability of our WMS for a 14th consecutive time by Gartner, included in the Challenger Quadrant. We were once again recognized for our product's completeness of vision and ability to execute. This is on top of the fact that Tecsys customers represent 40% of Gartner's healthcare supply chain top 25 list for calendar 2024.
Speaker Change: As we continue to build momentum in the market. We also saw a validation of the capability of our W. M S.
Speaker Change: Our 14th consecutive time by Gartner included in the Challenger quadrant.
Speaker Change: We were once again recognized for our products completeness of vision and ability to execute.
Speaker Change: This is on top of the fact that Texas customer, which represents 40% of Cardinal health care supply chain top 25 list for calendar 2024.
Peter Brereton: While it came just after our fiscal year end, our Tecsys User Conference was a key event for us. It's a chance to connect with our customers, highlight new products, build stronger relationships, and explore new growth opportunities. This year we had our largest turnout ever, with over 200 customers and prospects. We also shared that we'll be making the conference an annual event moving forward. So we'll have this important touch point with our customers on a more regular basis.
Speaker Change: Well it came just after our fiscal year and our Texas user conference was a key event for us it's a chance to connect with their customers highlight new products build stronger relationships and explore new growth opportunities. This year, we had our largest turnout ever with over 200 customers with prospects.
Speaker Change: We also shared that we'll be making a conference an annual event moving forward. So we will have this important touch point with our customers on a more regular basis.
Peter Brereton: At the user conference, we announced two exciting innovations. First, we introduced an Enhanced Electronic Shelf Label, or ESL+, which represents an important advancement in hospital supply chain management at the point of use. These are bi-directional smart tags that add real-time visual cues and allow clinical teams to request additional product or rush orders in real time. Secondly, we unveiled a brand new data product we're calling Tecsys IQ, a data layer that interacts with the existing Tecsys ecosystem. Texas IQ is a major leap forward in applied AI, and the excitement among customers and partners was evident. Built on the Databricks Data Intelligence Platform, Tecsys IQ helps organizations unify fragmented data and deliver AI-powered insights across clinical, operational, and financial systems. So we have good reason to feel confident about our position in the market, our base expansion rate, our backlog in both SaaS and professional services, and the strength of our vertical strategy.
Speaker Change: At the user conference, we announced two exciting innovations first we introduced an enhanced electronic shelf labels or E. S. L plus which represents an important advancement in hospital supply chain management at the point of views.
Speaker Change: These are bidirectional smart tags that add real time, visual cues and allow clinical teams to request additional product of rush orders in real time.
Speaker Change: Secondly, we unveiled a brand new data product, we're calling Texas Iq.
Speaker Change: Data layer that interacts with the existing Texas ecosystem.
Speaker Change: Texas IQ is a major leap forward in applied AI and the excitement among customers and partners was evident.
Speaker Change: On the data bricks data intelligence platform, Texas IQ helps organizations unify fragrant to data.
Speaker Change: We delivered AI deliver AI powered insights across clinical operational and financial systems.
Speaker Change: So we have good reason to feel confident about our position in the market our base expense rate or backlog in both SaaS and professional services and the strength of our vertical strategy.
Peter Brereton: As we continue to invest in the products we sell and in our go-to-market strategy, Tecsys is proving to be among the best cloud-based solutions available in the markets we serve.
Speaker Change: As we continue to invest in the products, we sell and then our go to market strategy, Texas has proven to be among the best cloud based solutions available in the markets we serve.
Peter Brereton: The steady growth we have 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 Bentler: Mark will now provide further details on our fourth quarter and year-to-date financial results, as well as financial guidance on several key metrics. Thank you, Peter. First, I'll focus on fourth quarter fiscal 2025 results. SAS revenue growth was 29%, reaching $18.4 million. SAS bookings were down year on year from a record $8 million last Q4, which was the high watermark so far for quarterly bookings, to $6.5 million this Q4. That $6.5 million, by the way, is the second-highest SAS booking quarter in our history. Q4 was another record total revenue quarter at $46.6 million. That was up 6% from the same quarter last year.
Speaker Change: Mark will now provide further details on our fourth quarter and year to date financial results as well as financial guidance on several key metrics.
Mark Butler: Thank you Peter first I will focus on fourth quarter of fiscal 2025 results.
Mark Butler: SaaS revenue growth was 29%, reaching $18 $4 million.
Mark Butler: Bookings were down year on year from a record 8 million last Q4.
Mark Butler: Which was the high watermark, so far for our quarterly bookings to $6 $5 million. This Q4.
Mark Butler: That $6 5 million by the way is the second highest SaaS booking quarter in our history.
Mark Butler: Q4 was another record total revenue quarter at $46 6 million that was up 6% from the same quarter last year, but if you exclude hardware revenue that growth was 16%.
Mark Bentler: But if you exclude hardware revenue, that growth was 16%. Professional services revenue for the fourth quarter was a record $16.2 million. That was up 13% from the same quarter last year. We had another solid professional services bookings quarter in Q4. And as Peter noted, we ended the year with record professional services backlog. For the fourth quarter of fiscal 2025, gross margin was 51% compared to 47% in the same period last year. The key drivers here are increasing SAS margins, as well as strength and professional services margins in the quarter. Net profit in the quarter was $1.7 million compared to $259,000 in the same quarter last year.
Mark Butler: Professional services revenue for the fourth quarter was a record $16 $2 million that was up 13% from the same quarter last year.
Peter Brereton: We had another solid professional services bookings quarter in Q4 and as Peter noted we ended the year with record professional services backlog.
Peter Brereton: For the fourth quarter of fiscal 2025 gross margin was 51% compared to 47% in the same period last year.
Peter Brereton: The key drivers here are increasing SaaS margins.
Peter Brereton: Well its strength in professional services margins in the quarter.
Peter Brereton: Net profit in the quarter was $1 $7 million compared to 259000 in the same quarter last year.
Mark Bentler: Fully diluted earnings per share were $0.11 in the current quarter compared to $0.02 in the prior quarter. Adjusted EBITDA was $4.3 million in Q4 fiscal 2025 compared to $2.8 million in the same quarter last year.
Peter Brereton: Fully diluted earnings per share were <unk> 11 cents in the current quarter compared to do two cents in the prior year quarter.
Peter Brereton: Adjusted EBITDA was $4 3 million in Q4 of fiscal 2025 compared to $2 8 million and the.
Peter Brereton: The second quarter last year.
Mark Bentler: Turning briefly to our full fiscal 2025 highlights. SAS revenue for fiscal 25 was $67.1 million. Again, that's up 29% from last year. SAS bookings for the year were $17.3 million. That was actually down 7% compared to last year. While this will have the impact of moderating SAS revenue growth in fiscal 2026, Based on the size and quality of our pipeline, we're optimistic about the future of SAS Revenue Graphics. Our total revenue reached $176.5 million. That was a 3% increase from last year. If you exclude hardware, overall revenue grew by 12%. For fiscal 25, our adjusted EBITDA increased to $13.4 million.
Peter Brereton: Turning briefly to our full fiscal 2025 highlights SaaS.
Peter Brereton: SaaS revenue for fiscal 'twenty, five was $67 1 million again, thats up 29% from last year.
Peter Brereton: SaaS bookings for the year were $17 3 million that was actually down 7% compared to last year.
Peter Brereton: While this will have the impact of moderating SaaS revenue growth in fiscal 2026.
Peter Brereton: Based on the size and quality of our pipeline, we are optimistic about the future of SaaS revenue growth.
Peter Brereton: Our total revenue reached $176 $5 million that was a 3% increase from last year.
Peter Brereton: If you exclude hardware overall revenue grew by 12%.
Peter Brereton: For fiscal 'twenty five our adjusted EBITDA increased to $13 $4 million that was up from $9 6 million last year.
Mark Bentler: That was up from $9.6 million last year. That's a 39% year-on-year increase in adjusted EBITDA. Basic and fully diluted earnings per share for fiscal 25 were $0.30. That compares to $0.13 in the same period last year. We ended fiscal 2025 with a solid balance sheet. We had cash and short-term investments of $39.3 million and no debt. We used about $6.9 million of cash in the year to buy back shares under our normal course issuer bid. Additionally, the board yesterday approved a quarterly dividend of eight and a half cents a share.
Peter Brereton: That's a 39% year on year increase in adjusted EBITDA.
Peter Brereton: Basic and fully diluted earnings per share for fiscal 'twenty, five or 30.
Peter Brereton: That compares to 13.
Peter Brereton: In the same period last year.
Peter Brereton: We ended the fiscal 2025 with a solid balance sheet, we had cash and short term investments of $39 $3 million and no debt.
Peter Brereton: We used about $6 $9 million of cash in the year to buy back shares under our normal course issuer bid.
Peter Brereton: Additionally, the board yesterday approved a quarterly dividend of eight and a half cents a share.
Mark Bentler: Turning to financial guidance. We are providing fiscal 26 guidance for SAS revenue growth of 20 to 22 percent. and total revenue growth of 8% to 10%. We've decided to increase our investment in R&D and marketing in fiscal 2026. to drive SAS margin growth and SAS revenue growth, respectively. As a result, we're revising our fiscal 2026 adjusted EBITDA margin guidance to 8 to 9 percent. and we expect the Justa Diva to grow. in the range of 20% to 30%?
Peter Brereton: Turning to financial guidance.
Peter Brereton: We are providing fiscal 'twenty six guidance for SaaS revenue growth of 20% 22%.
Peter Brereton: And total revenue growth of 8% to 10%.
Peter Brereton: We've decided to increase our investment in R&D and marketing in fiscal 2026 to drive SaaS margin growth in SaaS revenue growth respectively.
Peter Brereton: As a result, we're revising our fiscal 2026 adjusted EBIT margin guidance.
Peter Brereton: 8% to 9%.
Peter Brereton: And we expect adjusted EBITDA growth.
Peter Brereton: And the range of 20% to 30%.
Peter Brereton: I will now turn the call back to Peter to provide some outlook comments. Thanks, Mark. Tecsys fourth quarter and full year results reflect the consistent execution and momentum we've built throughout the year. Our solid footprint in key markets reinforces our confidence that we are well-positioned to upsell and cross-sell within health. Our value proposition in pharmacy remains compelling. We believe we are uniquely positioned to capitalize on the expanding opportunities in pharmacy and other adjacent healthcare vectors, which we see as an important growth engine for us. Our converging and general distribution also represents a substantial market opportunity.
Peter Brereton: I will now turn the call back to Peter to provide some outlook comments.
Peter Brereton: Thanks, Mark, Texas fourth quarter, and full year results reflect the consistent execution and momentum we've built throughout the year.
Peter Brereton: Our solid footprint in key markets reinforces our confidence that we are well positioned to upsell and cross sell within healthcare our value proposition and pharmacy remains compelling. We believe we are uniquely positioned to capitalize on the expanding opportunities in pharmacy and.
Peter Brereton: Other adjacent health care vectors, which we see as an important growth engine for us.
Peter Brereton: Are converging in general distribution also represents a substantial market opportunity.
Peter Brereton: We are pursuing targeted marketplaces and geographies within this space with an expanding emphasis on health care in this market as well. We are pleased that our pipeline is robust and we continue to see strong buyer intent across our verticals.
Peter Brereton: We are pursuing targeted marketplaces and geographies within this space with an expanding emphasis on health care in this market as well.
Peter Brereton: We are pleased that our pipeline is robust and we continue to see strong buyer intent across our verticals.
Peter Brereton: As I mentioned in my opening, we just wrapped up our largest-ever user conference in Nashville, and the energy from our customers was incredible. We heard from a great mix of voices, including presenters from Nissan, Vanderbilt Health, Mayo Clinic, Texas Children's Hospital, Wellstar Health, and AcuraState. These customer advocates shared some amazing insights on how Tecsys is making a real difference for them. It's clear we have a great opportunity to keep these conversations going, build on the momentum we've created, and capitalize on the market opportunity this event creates.
Peter Brereton: As I mentioned in my opening we.
Peter Brereton: Just wrapped up our largest ever user conference in Nashville, and the energy from our customers was incredible we heard from a great mix of voices, including presenters from Nissan Vanderbilt Health Mayo Clinic, Texas Children's Hospital, well start health and accurate sticks. These.
Peter Brereton: These customer advocates shared some amazing insights on how Texas is making a real difference for them.
Peter Brereton: It's clear we have a great opportunity to keep these conversations going build on the momentum we've created and capitalize on the market opportunity. This event creates so in summary, I want to share with analysts and investors our key themes for fiscal 2006.
Peter Brereton: So in summary, I want to share with analysts and investors our key themes for Fiscal 26. First, we will continue to invest to maintain and enhance our market leadership across the supply chain landscape with an emphasis on the end-to-end healthcare supply chain. This includes investments in product development and marketing to drive SAS margin expansion and bookings growth. Second, we are unlocking the full potential of data with our AI-driven Tecsys IQ platform to drive value and innovation across our solutions. This will be transformational for our customers. Third, we remain deeply focused on customer satisfaction, ensuring our software is reliable, scalable, and easy to use, giving our customers every reason to be passionate advocates for it.
Peter Brereton: First we will continue to invest to maintain and enhance our market leadership across the supply chain landscape with an emphasis on the end to end health care supply chain. This includes investments in product development and marketing to drive SaaS margin expansion and bookings growth.
Peter Brereton: Second we are unlocking the full potential of data with our AI, driven, Texas IQ platform to drive value and innovation across our solutions.
Peter Brereton: This will be transformational for our customers.
Peter Brereton: Third we remain deeply focused on customer satisfaction.
Peter Brereton: During our software is reliable scalable and easy to use giving our customers every reason to be passionate advocates for us.
Operator: With that, we'll open the call up for questions. Thank you. Thank you, ladies and gentlemen.
Peter Brereton: With that we'll open the call up for questions. Thank you.
Speaker Change: 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 Touchtone phone.
Operator: We will now begin the question and answer session. Should you have a question, please press star followed by the one on your touch-tone 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...
Speaker Change: Prompts that you had has been raised Jewish did decline from the polling process. Please press star followed by the Q. If you are using a speaker phone. Please lift the handset before pressing any keys.
Amr Ezzat: If you are using a speakerphone, please lift the handset before pressing any Your first question comes from Amr Ezzat with Ventum Capital Markets. Your line is now open. Good morning. Thanks for taking my questions. My first one is on your staff revenue guidance of 20% to 22%. It's below what you guys just posted, like 29% for fiscal 25. I'm wondering what specifically are you guys seeing in the pipeline that leads you to expect a deceleration? Is it you guys just being conservative or is there something more structural? And maybe this is related.
Speaker Change: Your first question comes from Amir is that with <unk> capital markets. Your line is now open.
Speaker Change: Good morning, Thanks for taking my question.
Speaker Change: My first one is on on your staffs.
Speaker Change: New guidance of 20% to 22%.
Speaker Change: Hello, what you guys just posted plus 29% for fiscal 'twenty five.
Speaker Change: I'm wondering what specifically are you guys seeing in the pipeline that leads you to expect a deceleration is it you guys just being conservative or is there something more structural.
Speaker Change: And maybe this is related so.
Amr Ezzat: So, you know, like, if you can maybe talk about how bookings and pipeline activity are trending early into the year, you know, with both the House and Senate advancing cuts to Medicaid, I think, a stark contrast from the last conference call when we last chatted, can you elaborate on any early signs of caution from your clients or anything like that?
Speaker Change: If you could maybe talk about how bookings and pipeline activity are trending early into the year.
Peter Brereton: With both the house and Senate advancing cut to Medicaid.
Peter Brereton: Contrast from from your last conference call when we last chatted.
Peter Brereton: Can you elaborate on any early signs of caution from your clients or anything like that.
Peter Brereton: Okay.
Mark Bentler: Sure, Mark, do you want to take the first part of that? I'll take the second. Sure, sounds good. So thanks for the question, Amr. So the thing about our SAS revenue, we've got at the end of this fiscal year, we've got what we think is 90% plus. of our revenue for SAS in fiscal 26 already booked. Right. So we're actually if you kind of look at that and do the math on that, you know, if you book a if you book a million dollars, you know, SAS deal, and Q4, it adds basically a million dollars of revenue in the subsequent year, depending if there's a ramp in it or if there's a slight delayed start, which we do from time to time, but normally it starts right away.
Mark Butler: Sure Mark do you want to take the first part of that I'll take care.
Peter Brereton: Sure sounds good so thanks for that thanks for the question number two.
Peter Brereton: The thing about our SaaS revenue, we've got at the end of this fiscal year. We've got what we think is 90% plus.
Peter Brereton: Our revenue for SaaS in fiscal 'twenty six already booked.
Peter Brereton: Alright, so were actually if you kind of look at that and do the math on that piece.
Peter Brereton: Can you book, if you book $1 million.
Peter Brereton: SaaS deal.
Peter Brereton: Q4, it adds basically a million dollars of Av.
Peter Brereton: Revenue in the subsequent in the subsequent year.
Peter Brereton: Depending if theres a ramp in it or.
Peter Brereton: There was a slight delay to start which which we do from time to time, but normally it starts the starts right away. So we've got we've got pretty good visibility into.
Peter Brereton: So we've got pretty good visibility into revenue in fiscal 26. We've also got, you know, line of sight to what we believe to be some pretty robust bookings and Peter will talk maybe to the pipeline and market conditions afterwards, but, you know, we're seeing strong indications of pipeline activity and expecting strong bookings on top, you know, to add accretively to that backlog of SAS that we have at the end of the fiscal year. Yeah, and I would just add, Amr, that, you know, as Mark's commented, we're not, at this point, seeing a slowdown in activity.
Peter Brereton: In the revenue in fiscal 'twenty six we've also got line of sight to what we believe to be some pretty robust bookings and Peter Peter will talk maybe.
Peter: To the pipeline and market conditions.
Peter: Afterwards, but we're seeing we're seeing strong indications.
Peter Brereton: Pipeline activity and expecting strong bookings on top you know to add.
Peter Brereton: Accretively to that.
Peter Brereton: Backlog of class that we have at the end of the year.
Peter Brereton: Okay.
Speaker Change: Yeah, and I would just add this is.
Mark Butler: As Mark commented, we're not at this point seeing a slowdown.
Peter Brereton: And in activity there.
Peter Brereton: There's no question, it's on everybody's mind. I was down at the SMI conference, whatever it was, two weeks ago, I guess. and you know these are all supply chain leaders from hospital organizations and you know the general consensus there was that you know all these sort of threats to cut medicaid are are sort of political posturing most of the dates that they're talking about in terms of when those cuts would kick in if this you know if this bill passes with those cuts in it the dates are sort of staggered out over the next couple of years with sort of lots of time to delay or cancel those cuts before those dates actually arrive so that the feeling generally seemed to be that it was you know largely political posturing it wasn't going to happen because any any party that actually cut 16 million people out of medicaid is you know is doomed to lose the next election.
Speaker Change: There's no question, it's on everybody's mind I was going with the SMA conference.
Peter Brereton: Whatever it was two weeks ago I guess.
Peter Brereton: And these are all supply chain leaders from hospital organizations and.
Peter Brereton: The general consensus there was.
Peter Brereton: You know all these sort of threats to attack.
Peter Brereton: Medicaid or are sort of political posturing most of the dates.
Peter Brereton: They're talking about in terms of when those cuts would kick in if this if this bill passes with those cuts in it.
Peter Brereton: <unk>.
Peter Brereton: Thank you David over the next couple of years with sort of lots of time to delay or cancel those cuts before those dates actually arrive. So the feeling generally seem to be that it was.
Peter Brereton: Largely political posturing it wasn't going to happen because any any party that actually cut 16 million people out of Medicaid is assumed to lose the next election.
Peter Brereton: Uh huh.
Peter Brereton: But at the same time, there's no question, it was top of mind for everybody. I mean, it was a frequent matter of conversation. But the consensus seemed to be that it was unlikely to actually bite. So we'll see. We're keeping an eye on it. At this point, though, we're not seeing any slowdown in activity. I mean, as we mentioned, we closed two deals in the fourth quarter when this was already sort of in the air, like two new accounts, you know, plus some expansions. So, and certainly the pipeline activity in the first quarter is showing, you know, is remaining quite strong.
Peter Brereton: But at the same time there is no question. It was top of mind for everybody I mean, it was a frequent matter of conversation.
Peter Brereton: But the consensus seem to be that it was unlikely to actually bite.
Peter Brereton: So we'll see we're keeping an eye on it.
Peter Brereton: At this point, though we're not seeing any slowdown in activity I mean, as we mentioned weak we closed.
Peter Brereton: Two deals in the fourth quarter. When this was already sort of in the year.
Peter Brereton: I'd like to new accounts, plus some expansions.
Peter Brereton: So.
Peter Brereton: And certainly the pipeline activity in the first quarter is showing.
Peter Brereton: Yes.
Peter Brereton: Is remaining quite strong so.
Amr Ezzat: We'll see how this ends. We're keeping an eye on it, but at this point it's still all systems go. Fantastic, appreciate the color.
Peter Brereton: We will see how this ends we're keeping an eye on it but at this point, it's still all systems go.
Speaker Change: Fantastic I appreciate the color I think one of your highlights of the quarter.
Amr Ezzat: I think one of the highlights of the quarter is the gross margin expansion on SAS. Can you elaborate on the key levers driving that? It seems to be tracking ahead of expectations.
Speaker Change: Gross margin expansion on SaaS.
Speaker Change: Can you elaborate.
Speaker Change: On the key.
Peter Brereton: Leavers driving that it seems to be tracking ahead of expectations is there anything abnormal.
Mark Bentler: Is there anything abnormal helping the expansion this quarter specifically? You know, no, I mean, it's it's going to continue to. bounce around a little bit, there's no question.
Peter Brereton: Helping the expansion this quarter specifically.
Peter Brereton: No I mean, it's going to continue to.
Peter Brereton: Bounce around a little bit Theres no question, but there is.
Mark Bentler: But there's, you know, there's really sort of three core levers we have on that. You know, and I'll sort of try to keep this brief. But, you know, first is we still have a few older accounts that, you know, first came onto our SaaS platform back in 2019 and 2020. And even 2021, when we first introduced it, they came onto our first generation SaaS. They have not migrated forward onto our mainline platform with that, you know, includes automatic upgrades and all those kinds of things. And that whole infrastructure and technology stack is much lower gross margin.
Peter Brereton: There's really sort of three core levers we have on that.
Peter Brereton: And I'll sort of try to keep this brief but <unk>.
Peter Brereton: First is we still have a few older accounts that first came on to our SaaS platform back in 2019, and 2020 and even 2021, when we first introduced it.
Peter Brereton: Now onto our first generation SaaS they have not migrated a forward onto our mainline platform that includes automatic upgrades and all those kinds of things.
Peter Brereton: And.
Peter Brereton: That whole infrastructure and technology stack is much lower gross margin.
Mark Bentler: So we are migrating those accounts forward onto our newest, you know, latest platform that includes automatic upgrades and the greatest security and all those kinds of things. And, but it also, as they move, we end up with a client coming off of a low gross margin stack onto a high gross margin stack. So that, that is a driver.
Peter Brereton: So we are migrating those accounts forward onto our newest.
Peter Brereton: Latest platform that includes automatic upgrades in the latest and greatest security and all those types of things and but it also as they move we ended up with a client coming off of a low gross margin stack onto a high gross margin stack. So that that is a driver. We are also continuing to re architect.
Mark Bentler: We are also continuing to rearchitect the our overall platform for more and more public cloud infrastructure efficiency. And we're making very good headway on that. I think we've got probably two more years of investing in that where they were still dealing with, you know, pretty serious payback as we go. You know, I think sort of two years from now, there's always going to be ways to continue to improve it. But I think the bulk of that progression will be complete within about two years.
Peter Brereton: Our overall platform for more and more public cloud infrastructure efficiency, and we're making very good headway on that I think we've got probably two more years of investing in that where they were still dealing with.
Peter Brereton: Pretty serious payback as we go.
Peter Brereton: Hi.
Peter Brereton: Think sort of two years from now there is always going to be ways to continue to improve it but I think the bulk of that progression will be complete within about two years.
Mark Bentler: And then the last area is just as we continue to drive up quality and, you know, reliability and user friendliness, we continue to drive down customer care costs, you end up with less and less calls, less and less tickets coming into the customer care team. That's another aspect of cost that goes into supporting a SaaS account. And we're making pretty good headway on that. If I look at the last 12 months, we've actually brought our severity one and severity two tickets down by about 35%. Compared to a year ago, we're continuing to drive that number down.
Peter Brereton: And then the last area is just as we continue to drive up quality and.
Peter Brereton: Reliability and user friendliness, we continue to drive down customer care costs, you end up with less and less calls less less tickets coming into this customer care team that's another aspect.
Peter Brereton: Aspect of cost that goes into supporting SaaS count.
Peter Brereton: And we're making pretty good headway on that if I look at the last 12 months, we've actually brought us our severity wanted severity two tickets down by about 35%.
Peter Brereton: Compared to a year ago, we're continuing to drive that number down but that is another key factor in achieving higher SaaS gross margins. So I mean, our objective over the next sort of two to three years is actually drive it to 80%.
Mark Bentler: But that is another key factor in achieving higher SaaS gross margins.
Mark Bentler: So I mean, our objective over the next sort of two to three years is actually drive it to 80%. You know, we're, we'll see how we do on that trajectory. I know our investor deck shows a progression to 75, where, you know, internally, we're shooting a little higher than that. But we think we're, we've got sort of these three key levers to make that That's great to hear.
Peter Brereton: Alright.
Peter Brereton: Sure.
Peter Brereton: We'll see how we do on that trajectory I know our investor deck shows the progression of <unk> 75 were internally, we're shooting a little higher than that.
Peter Brereton: But we think we've got sort of these three key.
Peter Brereton: Leavers to to make that list.
Speaker Change: That's great to hear and then maybe one last one if you'll allow me.
Mark Bentler: Then maybe one last one if you'll allow me. Your adjusted EBITDA guidance of 8-9% down from 10-11, and this despite obviously the gross margin expansion, my quick math is it's like an extra $4 million of OPEX investments. I just wonder where exactly are you guys spending in R&D than in marketing, if you could just like break down the different areas.
Peter Brereton: Your adjusted EBITDA guidance of eight 9%.
Peter Brereton: <unk> gone from 10 to 11.
Peter Brereton: And this despite obviously the gross margin expansion.
Peter Brereton: My quick math is it like an extra $4 million of Opex investments. So I, just wonder where exactly are you guys spending.
Speaker Change: In R&D.
Speaker Change: In marketing if you could just like breakdown would be different areas.
Mark Bentler: Sure. I would lump them into two main areas. There is some additional spend in sales. We do continue to invest there. We brought on a senior expert out of the hospital market to join the sales team, and he's been a senior supply chain leader at a hospital network. He's joined the sales organization as a hospital supply chain expert. He's going to be helping the entire hospital sales team. So we do continue to invest in sales, but that's probably the smallest piece of that, I would think.
Speaker Change: Sure. There is two I would lump them into two main areas. There is some additional spend in sales.
Speaker Change: We do continue to invest there we brought on a senior.
Speaker Change: No.
Speaker Change: Expert at the hospital market to join the sales team and he's been a senior supply chain leader.
Speaker Change: Hospital network. He has joined the sales organization as a sort of hospital supply chain experts he is going to be helping the entire hospital sales team.
Mark Butler: So we do continue to invest in sales, but but that's probably the smallest piece of that I would think mark can correct me here.
Mark Bentler: Mark can correct me here when I'm done. I'll give you the high level. But the majority is really marketing, as we're looking to sort of get the messaging out around the end-to-end healthcare supply chain that we are, you know, not, we're hospitals, but we're also, you know, distributors and 3PLs and manufacturers. We have a complete end-to-end platform for the whole hospital supply chain continuum. And we want to get that message out across both North America and Europe. So we are cranking up marketing spend in that area with the interest of driving bookings back up, bookings growth back up to a higher level.
Peter Brereton: The high level.
Peter Brereton: But.
Peter Brereton: The majority is really marketing.
Peter Brereton: As we're looking to sort of get the messaging around the end to end health care supply chain that we are not where hospitals, but were also distributors in <unk> and manufacturers. We have a complete end to end platform for the whole hospital supply chain continue.
Peter Brereton: And we wanted to get that message out across both North America and Europe. So we are cranking up marketing spend in that area with the interest of driving bookings backup bookings growth back up to a higher level. We think we can get bookings growth back up to.
Mark Bentler: We think we can get bookings growth back up to, you know, close to 30%. And, but we think we've got to get that messaging out there loud and clear. And then in, you know, on the R&D front, there is some additional investment going into FedRAMP because we really need, we do a lot of government business and we really need to be FedRAMP compliant. So that has driven some extra costs, but the bulk of the extra investment in R&D is it's just AI, AI, and AI. I mean, we're putting it everywhere across the product. We've got some really exciting stuff coming at that Texas IQ platform is sort of underlying that effort, but we are investing across point of use, you know, the IR, OR, cath lab, you know, nursing station, the warehouse, the warehouse execution system, et cetera, right across the board to create a a platform that really takes full advantage of the excellent data that we have in our platform.
Peter Brereton: Close to 30%.
Peter Brereton: But we think we've got to get that messaging.
Peter Brereton: They are loud and clear.
Peter Brereton: And then.
Peter Brereton: On the R&D front.
Peter Brereton: There is some additional investment going into fed ramp because we really needed. We do a lot of government business and we really needed to be fed ramp compliance alright. So that has driven some extra cost, but the bulk of the extra investment in R&D is it's just AI AI and AI, I mean, where were putting it everywhere across the product we've got some.
Peter Brereton: So really exciting stuff coming at that whole, Texas Iq platform.
Peter Brereton: Is sort of underlying that.
Peter Brereton: That effort, but we are investing across point of views.
Peter Brereton: The IR or Cath lab.
Peter Brereton: Nursing station.
Peter Brereton: The warehouse the warehouse execution system et cetera, right across the board.
Peter Brereton: To create a.
Peter Brereton: Yes.
Peter Brereton: Platform that really takes full advantage of the excellent data that we have in our platform.
Mark Bentler: I think I would, I would add one, I would add one thing to that, Amr, I think is that we just closed up that asset acquisition. in India on May 1st, as Peter mentioned earlier in the call. And that's going to, you know, if you look, if you're looking at OPEX lines of cost, that's going to, that's going to add sequential cost. There was some revenue that came with that too, but it's going to add sequential cost into that R&D line and also in the, a little bit in the margin, but mostly in the R&D line.
Peter Brereton: And frankly, I think I would I would add one I would add one thing to that I think is that.
Peter Brereton: <unk> closed up that as acquisition.
Peter: In India on May 1st as Peter mentioned earlier on the call.
Peter: And that's going to if you look if youre looking at Opex lines of cost that's going on that's going to add sequential cost.
Peter: There was some revenue that came with that too, but it's going to add sequential cost into that.
Peter: R&D line and also in.
Peter: A little bit on the margin, but mostly in the R&D line.
Mark Bentler: Yeah, and I suspect the user conference as well. Yeah, you'll see that come through in Q1, exactly.
Peter: And I suspect the user conference as well.
Peter: Yes, youll see that come through in Q1 exactly.
Amr Ezzat: Fantastic. Thanks for the call, Mark.
Speaker Change: Fantastic. Thanks for the color Mark best of luck.
Operator: Passed on. Thank you.
Peter: Yes.
Peter: Thank you Brooks.
Peter: Brooks.
Gavin Fairweather: Your next question comes from Gavin Fairweather with Cormark. Your line is now open. Oh, hey, good morning. Thanks for taking my questions. Maybe just to start, I mean, you guys seem to be getting, you know, more traction in the broader health care supply chain. So call it outside the hospitals. And you're talking about leaning in on sales marketing.
Speaker Change: Your next question comes from Gavin Fairweather with Carmike. Your line is now open.
Speaker Change: Oh, Hey, good morning, Thanks for taking my questions, maybe just to start I mean, you guys seem to be getting more traction in the broader health care supply chain. So call. It outside the hospitals and you are talking about leaning in on sales and marketing curious if you've done any work to size up that Tam and what are your thoughts about the velocity of that market in years out.
Peter Brereton: Curious if you've done any work to size up that, Tim, and what are your thoughts about the velocity of that market in years ahead? You're saying the U.S. hospital market? No, like the broader supply chain, the distributors, like have you have you sized up that, Tim? And what are your thoughts on the speed of that market in the years? Well, I mean, it's interesting that the general, I mean, what we're seeing in the market is some really serious activity, right? It, we're You know, we're trying to tighten our focus because that market is actually so large, right?
Speaker Change: Okay.
Peter: Yeah.
Peter: Youre, saying that U S hospital market.
Peter: No I like the broader supply chain. The distributor like have you have you sized up that Tam and what are your thoughts on the speed of that market in the year is that.
Peter: Well.
Peter: I mean, it's interesting that the general I mean, what we're seeing in the market, it's really serious activity rate.
Peter: We are.
Peter: We're trying to tighten our focus because that market is actually so large right. So if I look at the general supply chain market that we've played in for years. When we say there's 12000 companies in North America with an average.
Peter Brereton: So if I look at the general supply chain market that we've played in for years, we say there's 12,000 companies in North America, you know, with an average initial ARR of 500,000, you know, for a $6 billion TAM, that's a very, very large market. Our, our win rate in that very large market tends to run, you know, 30, 30 ish to 40 ish percent. We have decided we would rather narrow our focus in that market to only pursue the verticals within it, or sub-verticals, if you will, where our win rate is over 50%. So we're narrowing our focus to areas like, for instance, electrical.
Peter: Initially our 500000.
Peter: For $6 billion Tam that's a V.
Peter: Very very large market or our win rate in that very large market tends to run.
Peter: 30, 30 to 40 ish percent.
Peter: Hi.
Peter: We have decided that we would rather narrow our focus in that market to only pursue the verticals within it or sub verticals. If you will.
Peter: Our win rate is over 50%. So we're narrowing our focus to areas like for instance, electrical our win rate is very high electrical.
Peter Brereton: Our win rate is very high in electrical. Our win rate is very high in anything to do with healthcare. So that can be eye care products, ear products, foot products, joints and knees, and medical supplies and safety supplies, and drugs, certainly drugs is a huge part of it. And then across all those sub-verticals, you have the manufacturers within those, the distributors within those, and the 3PLs within those. So when we narrow to that focus, we find our win rate shoots a lot higher. We are still, as we're making that pivot, we've done some analysis to say, how big is that TAM?
Peter: Our win rate is very high in anything to do with health care, so that can be.
Peter: Eyecare products ear products foot products joints, and needs and medical supplies and safety supplies and.
Peter: And drugs certainly drugs is a huge part of it.
Peter: And then across all of those verticals you have the manufacturers within those distributors within those in the three pls within those so so when we narrow to that focus we find our win rate sheets a lot higher.
Peter: We are still as we're making that pivot we've done some analysis to say how big is that Tam.
Peter Brereton: And it's still very large. We can't give you precise numbers yet because we're also pulling in Europe. We're doing business in the UK. We added a nice deal in the fourth quarter over in the UK in the healthcare supply chain space, so we're still getting a handle on what that TAM is. If I were to hazard a guess, I think it's about a $2 billion TAM across sort of Europe and North America, but we're still trying to get that nailed down. Velocity, it's moving at a good clip. There's been some tariff fears. There's no question.
Peter: And it's still very large we can't give you precise numbers yet because we're also pulling in Europe, we're doing business in the UK.
Peter: We added a nice deal in the fourth quarter over in the UK in the health care supply chain space.
Peter: So were we.
Peter: We're still getting a handle on what that Tam is if I were to hazard a guess I think it's about a $2 billion tam across sort of Europe.
Peter: And North America, but we're still we're still trying to get that nailed down.
Peter: Velocity.
Peter: It's moving at a good clip.
Peter: Theres been some tariff fears there's no question, there's a lot of.
Peter Brereton: There's a lot of disturbance around tariffs, but in the meantime, as I think we've chatted about before, the bulk of the systems these companies are running were put in in time for Y2K, so that story is coming to its last chapter. I mean, these systems need to be replaced. So you have organizations like Gartner and others saying that this market is going to grow at 10% to 15% a year for probably the next 10 years, and it's certainly what we're seeing. We will see how this goes as we make this sort of shift to a narrower focus within that very broad market.
Peter: Disturbance around tariffs, but in the meantime.
Peter: As I think we've chatted about before the bulk of the systems. These companies are running we're putting in time for y2k. So that that story is coming to its last chapter I mean, these systems need to be replaced so you have organizations like Gartner and others, saying that this market is going to grow it.
Peter: 10% to 15% a year for probably the next 10 years.
Peter: And it's certainly what we're seeing so we'll.
Peter: We will see how this goes as we make this sort of shift to a narrower focus within that very broad market, but where.
Peter Brereton: We're pretty excited about the possibility. We certainly believe it well that the go-lives are quite recent, like we've had, you know, we had one that sort of did a gradual go-live over... over April. I guess the initial inbound was in April and then they started some of the outbound GoLive in June. We actually had one of our, one of the supply chain leaders was actually at our user conference, you know, pharmacy supply chain leaders was at our user conference as their organization was in the process of going through the next phase of GoLive, which I thought actually showed a pretty strong, strong degree of confidence.
Peter: We're pretty excited about the possibilities.
Speaker Change: Very helpful. And then secondly for me I think last call you had talked about a couple of additional customers going live on pharma. So just curious how those implementations went how how the you know our data coming out of that is looking in terms of the ROI on and whether you think that that will catalyze activity in fiscal 'twenty six.
Speaker Change:
Speaker Change: We certainly believe it will.
Speaker Change: Go lives are quite recent like we've had.
Speaker Change: We had one that sort of did a gradual go live over.
Speaker Change: Over April I guess, the initial inbound was in April and then they started some of the outbound go live in June.
Speaker Change: One of our one of the supply chain leaders I was actually at our user conference.
Speaker Change: Pharmacy supply chain leaders was at our user conference.
Speaker Change: The organization was in the process of going through the next phase of go lives, which.
Speaker Change: Actually showed a pretty strong.
Speaker Change: With confidence.
Peter Brereton: But they've, they've now proceeded to the next phase. So like everything's progressing on track, but I would say it will be I would think it will be this fall, by the time they have enough data to really say sort of, okay, here's the before picture and here's the after picture and here's what we're seeing, et cetera. I mean, we already have Parkview Health who's willing to stand up and say, yeah, they turned it all on over a year ago and they're seeing great results. But this latest wave, Northwestern and St. Luke's and others, I would think that it's probably this fall by the time we're seeing that.
Speaker Change: But they've they've now procedures. The next phase so like everything is progressing on track, but I would say it will be.
Speaker Change: I would think it will be this fall by the time they have enough data to really say sort of okay. Here's the before picture and here's the after picture and here's what we're seeing et.
Speaker Change: Et cetera, I mean, we already have parkview health, he's willing to stand up and say yes.
Speaker Change: They turned it a lot over a year ago, and they're seeing great results, but this latest wave northwestern.
Speaker Change: And.
Speaker Change: St Lukes and others I would think that that's probably this fall by the time, we're seeing that David.
Gavin Fairweather: Very helpful.
Speaker Change: Very helpful. And then maybe lastly for me for Mark I think last quarter, you talked about a couple of decent maintenance to SaaS migrations and I think the script you talked about another one.
Mark Bentler: And then maybe lastly, for me, for Mark, I think last quarter, you talked about a couple decent maintenance to SAS migrations, and I think the script, you talked about another one in healthcare, maybe this quarter. So can you just help us frame, you know, how we should be thinking about the maintenance line going forward, and how we should think about that? winding down a little bit as that revenue flips to south. Yeah, that's a good point. And we do see it. I mean, it came down a little bit, you know, from 24 to 25 as these, you know, historical migrations kind of go alive on SAS and turn off, you know, on-prem stuff.
Speaker Change: And health care, maybe this quarter. So can you just help us frame how.
Speaker Change: How we should be thinking about that maintenance line going forward and how we should think about that maybe.
Speaker Change: Maybe winding down a little bit as long as that revenue flips to SaaS.
Speaker Change: Yeah, that's a good point and we do and we do see it I mean, it came down a little bit.
Speaker Change: From 24 to 25 as these historical migrations.
Speaker Change: Go live on SaaS and turn off on Prem stuff.
Mark Bentler: And there's, you know, there's definitely a wave of that coming. I think you'll see, you know, a like or actually probably slightly higher decline in year-on-year maintenance and support if you look out at 26, you know, from 25 to 26 versus what happened in 24 to 25, which you would kind of, you know, you would kind of expect because we've been, you know, selling these on-prem migrations for a number of years and we've sold, you know, we've sold a good chunk of them. So, yeah, that's going to come rippling through and you'll see that in 26.
Speaker Change: And there is definitely a wave of that coming I think you will see.
Speaker Change: No.
Speaker Change: Nick or actually probably slightly higher decline in year on year maintenance and support if you look out at 26 from 25 to 26 versus what happened in $2004 25, which you would kind of you would kind of expect because we've been selling these on prem migrations for a number of years.
Speaker Change: We've sold we sold a good a good chunk of them so.
Speaker Change: Yes.
Speaker Change: That's going to come Brooklyn through and Youll see that in 2006.
Gavin Fairweather: Thanks so much for passing along. Thanks, Kevin.
Speaker Change: Thanks, So much I'll pass the line.
Joe: Thanks, Joe.
John Shaw: Your next question comes from John Shaw with National Bank. Your line is now open. Good morning, thanks for taking my question. I'm trying to get an understanding of your net revenue retention. I mean, it's still robust at 106%, but a bit lower compared to 2023 and 2024 levels. So are we getting some normalizations following the COVID peak?
Speaker Change: Your next question comes from John Show with National Bank. Your line is now open.
John Show: Hey, good morning, Thanks for taking my question I'm trying to get a understanding your net revenue retention I mean, there's still robust at 106%, but a bit lower compared to 2023 and 2024 levels. So are we getting some normalization following the Colgate peaks.
John Show: Yes.
Mark Bentler: Sorry, go ahead, Mark. I was just going to, I think what you're seeing there is we've got, you know, the, the, that base of customers, that number that we disclosed there is ARR, you know, so it's all ARR based and, you know, what we have going on in there is, you know, expansions and migrations drive that number up and, you know, churn drives that number down. And what we saw happening in, in the latest quarter, like last year in Q4 of, of 2024, we had a really big booking quarter. There was a lot of, of expansion and migration in that, in that booking quarter.
Mark Butler: Sorry go ahead Mark.
Mark Butler: I was just kind of I think what youre seeing there is we've got.
John Show: That base of customers that number that we disclosed there is air are so its all <unk> basin.
John Show: What we have going on and there is.
John Show: Spansion and migrations drive that number up and churn drives that number down and what we saw happening in the latest quarter last year Q4.
John Show: Of 2024, we had a really big bookings quarter.
John Show: There was a lot of expansion in migration in that in that booking quarter, and what youre kind of seeing here is that.
Mark Bentler: And what you're kind of seeing here is that, you know, we make, we do that measurement on an LTM basis. We're no, no longer picking up the large sort of outsized migration and expansion in that one Q4. So it kind of dipped down here as we, as we normalized, but certainly we expect that, you know, to climb, you know, to continue to climb back up. When we look forward and look at, you know, bookings and bookings mix, we were sure expecting, you know, that our base of customers that are existing SaaS customer now, customers now, you know, we'll, we'll continue to grow with us.
John Show: We do that measurement on an LTM basis, where no no longer picking up the large sort of outsized migration or expansion in that one Q4, so it kind of dipped down here as we as we normalize but certainly we expect that decline.
John Show: Climbed back up.
John Show: When we look forward and look at bookings and bookings mix.
John Show: We're sure expecting that our base of customers that are existing SaaS customer now customers now we'll continue.
John Show: To grow with us.
Mark Bentler: The bookings that we reported in, in Q4 of this year played, played that out, you know, pretty nicely, you know, for, for one quarter where we had, you know, a big chunk of those, of those bookings in the current Q4 coming from, coming from migration. So we expect that to, you know, to continue in the future, expansion bookings and, and, you know, new logo bookings together will become a much bigger part of our total bookings. And that should drive that number. We believe back, back North.
John Show: The bookings that we reported in Q4 of this year played played that out.
John Show: Pretty nicely.
John Show: For one quarter, where we had a big chunk of those.
John Show: Bookings in the current Q4.
John Show: <unk> from coming from migration, so we expect that to.
John Show: To continue in the future expansion bookings.
John Show: And new logo bookings together will become a much bigger part of our total bookings and that should drive that number we believe back north.
Mark Bentler: A lot of things. You have two years in a row where you report strong south volcanoes by Q4. Is that a new trend or something we should expect going forward? You know what? It's a good question. As much as we try to manage that to moderate out the lumpiness in our, forget about our year, but even our quarters, it's really tough to do. We've seen that historically. Q4 been a time where bookings have peaked. I mean, I think the base of prospects is pretty well trained. They know when our year ends are and they tend to use it as well.
John Show: Okay.
John Show: Thanks.
Speaker Change: Two years in a row, where you report strong SaaS bookings by Q4 is not a new trend.
John Show: It's something we should expect going forward.
Speaker Change: Hi.
Speaker Change: It's a good it's a good question as much as we try to.
Speaker Change: Manage that moderate out the lumpiness in our in our forget about our year of any of our quarters. Its really its really its really tough to do.
Speaker Change: Seeing that historically Q4 Ben.
Speaker Change: <unk>.
Speaker Change: Been a time where bookings have peaked in.
Speaker Change: Are the base of <unk>.
Speaker Change: Prospects is is pretty well trained.
Speaker Change: They know when our year ends are in the they kind of they tend to kind of use it.
Mark Bentler: So yeah, it's hard to call, but I think that is, we've tried to break that trend, but it is kind of the trend. So I would expect that in the future. When we think about planning, we're certainly ramping up our bookings in the back half of our fiscal year and into Q4. As opposed to in the front half of the year.
Speaker Change: As well so.
Speaker Change: It's hard to call, but I think that is.
Speaker Change: We've tried to break that trend, but it is kind of the trend. So I would expect that in the future.
Speaker Change: We think about planning, we're certainly ramping up our bookings in the back half of our fiscal year and into Q4 as opposed to in the front half of the year.
Speaker Change: Yes.
Speaker Change: Okay.
Operator: Ladies and gentlemen, as a reminder, should you have a question, please press star 1.
Speaker Change: Ladies and gentlemen, as a reminder, should you have a question. Please press star one youre.
Suthan Sukumar: Your next question comes from Suthan Sukumar with Stiefel. Your line is now open.
Speaker Change: Your next question comes from Sudan, So Kumar with Stifel. Your line is now open.
Suthan Sukumar: Hey guys, this is Essay, speaking on behalf of Suthan. Just a few questions for me. I know you mentioned that ProServices is variable, but ProServices backlog and bookings were strong this quarter. So I was curious to know if you can just give some additional color on what is driving that and what that implies for SaaS revenue growth. Yeah, it's a good question. I think if I could take maybe that question, the back half of our bookings year for PS this year was super robust, and that's driving that and in backlog. And I think what that tells us is, you know, the market, the purse strings of our prospects in that hospital network market have loosened up, we believe.
Speaker Change: Hey, guys. This is FC speak.
Speaker Change: Speaking on behalf of Susan just a few questions for me.
Speaker Change: I believe you mentioned that pro services is it.
Speaker Change: Variable, but pro services backlog and bookings were strong this quarter. So I was curious to know if you can just give.
John Show: Some additional color on what is driving that and what that implies for a good percentage revenue growth.
John Show: Okay.
John Show: Yeah.
John Show: Yes, it's a good question I think.
John Show: If I could take maybe that question the.
John Show: The back half of our bookings year for PFS. This year was super robust and that's that's driving that ending backlog and I think what that tells us is the market.
John Show: Purse strings of our prospects in that hospital network market have loosened up we believe and we saw that in the back half of the year with these big projects.
Mark Bentler: And we saw that in the back half of the year with these big projects, you know, extending and more capital flowing into, you know, from the hospital networks into our professional services projects. So that's great, because that means projects will continue to move, they'll move, they'll move more quickly, and customers go live. And that's great for us, because it just firms up the customer, you know, commitment to the platform. So we feel good about that. And I think, you know, in some ways, especially that happening in light of, you know, kind of some market, some geopolitical turmoil and things, I think it gives us cause for optimism and, and, you know, and, and hospital network budgets, you know, at least for the near term and the future.
John Show: Extending and more capital flowing into.
John Show: From the hospital networks into our professional services projects. So that's great because that means projects will continue to move they'll move they will move more quickly and customers go live and that's great for us because it just firms up.
John Show: Customer.
John Show: Commitment to that to the platform. So we feel good about that and I think in some ways, especially that happening in light of.
John Show: Kind of some market some geopolitical turmoil and things I think it gives us cause for optimism.
John Show: In our hospital network budgets at least for the near term in the future. So we feel like Thats a good a good positive sign in terms of what thats going to do to professional services revenue.
Mark Bentler: So, you know, we feel like that's a good, a good positive sign, in terms of what that's going to do to professional services revenue, you know, we crossed over, we just reported this $16 million professional services revenue quarter, which was, you know, bigger, we've never been in the 16th before. In fact, we haven't been in the 15th before. So, you know, we think this with this backlog, we think this, we may not be at this sort of $16 million level, you know, in the coming quarters, but we're going to be at a very real, we believe will be at a very robust level of professional services revenue in the coming quarters on the back of that backlog.
Ross Stover: Ross Stover.
Ross Stover: And we just reported this $16 million professional services revenue.
John Show: The quarter, which was <unk>.
John Show: Bigger we've never been in the sixteens.
John Show: Before I talked to have been the 15th so far so.
John Show: We think this with this backlog we think.
John Show: We may not be at the sort of $16 million level.
John Show: <unk>.
John Show: In the coming quarters, but we're going to be a very real we believe we'll be at a very robust level of professional services revenue in the coming quarters on the back of that backlog.
Mark Bentler: Thank you. And maybe a follow up for that. SAS backlog was up 10 percent and it seems like there's still elevated activity and demand here. Could you provide maybe a quick rehash on backlog conversion and how we should think about that and how that looks like? Um, well, I'm, are you talking about like how contracts sort of convert into SAS revenue and how that backlog converts into SAS revenue? Yeah. So, I mean, our typical contracts are, you know, three to five years long. So when we track our SAS backlog, we're taking the totality of the future value of that contract.
Speaker Change: Thank you. Thank you and maybe a follow up for that.
Speaker Change: SaaS backlog was up 10% and it seems like there is still.
John Show: Elevated activity in demand here could you provide.
John Show: Maybe.
John Show: A quick rehash on backlog conversion and how we should look at how we should see that how we should think about that and how that looks like.
John Show: Yeah.
John Show: Well.
Speaker Change: Are you talking about like how contracts sort of convert into SaaS revenue and how that backlog converts into SaaS revenue.
John Show: Yes.
John Show: Yeah.
John Show: So I mean, our typical contracts are three to five.
John Show: Yeah as long so when we track our SaaS backlog.
John Show: We're taking the totality of the future value of that contract.
Mark Bentler: So if we sign a five-year contract, the SAS backlog is, you know, 5X that SAS ARR amount. So the revenue recognition of that, you know, of course, is typically recognized ratably over the contract period, so over the five-year period. That backlog itself is made up by now of, you know, a mix of many different multi-year contracts, all with varying sort of end dates. So that's when you, that's why when you look in the footnotes and you look at how we, you know, actually disclosed, you know, when that revenue is expected to be recognized on those contract commitments, you can see that in our notes to our, on our financial statement.
John Show: So if we sign a five year contract the past backlog is five ex that.
John Show: SaaS IRR amount. So the revenue recognition of that Christmas is typically recognized ratably over the over the contract periods over the five year period that backlog itself is made up by now.
John Show: A mix of many different.
John Show: A multi multiyear contracts all with varying.
John Show: Sort of end dates.
John Show: So that's when you that's why when you look in the footnotes and you look at how we.
John Show: We actually disclosed.
John Show: When that revenue is expected to be recognized on those on those contract commitments you can see that in our in our notes to our financial statements.
Mark Bentler: So that's kind of how we disclose that backlog and how it looks like it's going to roll out in the future. Of course, every quarter, we book more SAS, which increases that RPO. And revenue recognition, of course, reduces that RPO.
John Show: So that's that's kind of how we disclose that backlog in.
John Show: How it looks like its going to rollout in the future of course every quarter, we booked more SaaS, which which increases that that our Po and revenue recognition of course.
John Show: It reduces that RPM.
Mark Bentler: Great, just one last one for me. I was curious to know what the fiscal 26 guide is baking in in terms of, or with regards to contributions from healthcare versus distribution. Yeah, I mean, if you look at kind of what we've been seeing over the last, you know, number of quarters and even number of years, and especially as we look at our marketplace, you know, our healthcare marketplace more broadly now, i.e. it's hospital networks, plus it's, you know, it's hospital-related distribution companies like, you know, like the medical equipment supplier that Peter referred to that we signed up for, and then in Q4, and if you look at that broader definition of the market, like a significant majority of our business and our growth is coming out of that healthcare marketplace.
Speaker Change: Great and just one last one for me.
John Show: I was curious to know what the fiscal 'twenty six guidance baking in in terms of.
John Show: With regards to contribution.
Mark Bentler: Health care versus distribution.
John Show: Yes, I mean, if you look at kind of what we've been seeing over the last.
John Show: A number of quarters and even number of years.
Mark Bentler: And especially as we look at our marketplace.
John Show: Our health care market place more broadly now.
John Show: Ies Hospital networks plus.
John Show: Yeah.
John Show: It's hospital related distribution companies like.
Peter Brereton: Like the medical equipment supplier that Peter referred to that we that we signed in Q4 and if you look at that that broader definition of the market like a significant majority of our of our business and our growth is coming out of that health care.
Mark Bentler: So that's where we're focused. That's where we're putting, you know, more marketing energy now with this additional investment. And that's where we expect the, you know, the majority of our, the significant majority of our bookings to come from.
Peter Brereton: Marketplace. So that's where we're that's where we're focused.
Peter Brereton: Why were putting more marketing energy now with this additional investment and that's what we expect the you know the.
John Show: Majority of our of our a significant majority of our bookings come from.
John Show: Yeah.
Suthan Sukumar: Perfect, thank you.
John Show: Perfect. Thank you I'll pass over to Mike.
Operator: I'll pass over to Mike. Thanks.
John Show: Thanks.
John Show: Okay.
Stephen Li: This is the operator. Your line is open, Stephen. Oh, hi, thanks. Hey, guys. Peter, your comments on not seeing any slowdown in activity. So when we think of SAS bookings for fiscal 2026, you would fully expect to see good bookings growth, right? You would be very disappointed, let's say, if it's flat. Yeah, is that correct? Yeah, I would be very disappointed.
John Show: This is the operator your line is open Stevens.
Speaker Change: Oh, hi, thanks.
Speaker Change: Hey, guys.
Speaker Change: Peter your comments on not seeing any slowdown in activity.
Speaker Change: So when we think of SaaS bookings for fiscal 2026, you would fully expect to see like good bookings growth right like you would be very disappointed let's say, if it's flat year over year is that correct.
John Show: Yeah, Yeah, I would be very disappointed I'm not about to make a prediction Stephen which I know is what youre trying to drive it into but I would agree with you 100% that I'd be very disappointed if I didn't see bookings growth in fiscal 2000.
Peter Brereton: I'm not about to make a prediction, Stephen, which I know is what you're trying to draw me into, but I would agree with you 100% that I would be very disappointed if I didn't see bookings growth in fiscal 2020. Okay, got it. And then, I might have missed it, but did you say how many IDNs? You're wanting two for? Two. Okay, thank you. We added two new IDNs in Q4. Got it, thanks.
Speaker Change: Okay got it and then I might have missed it but did you say, how many IBM Q1 and Q4.
John Show: Sure.
John Show: Okay.
John Show: We added two new ideas in Q4.
John Show: Got it thanks.
John Show: Thanks.
Operator: There are no further questions at this time.
Speaker Change: There are no further questions at this time I will now turn the call over to management for closing remarks.
Peter Brereton: I will now turn the call over to management for closing remarks. Great. Well, thank you everyone for joining us. I'm glad to have you with us. Thanks for taking time out of your day to be with us on the call. And as usual, if you have additional questions, please don't hesitate to reach out to Mark or myself, and we'll look forward to chatting to you in September after we release our Q1 results. Thanks and have a great summer. Bye for now.
Mark Butler: Great well. Thank you everyone for joining us I am glad to have you with us. Thanks for taking time out of your day to be with us on the call and as usual. If you have additional questions. Please don't hesitate to reach out to mark or myself and we look forward to chatting with you in September after we release, our Q1 results.
Speaker Change: So have a great summer bye for now.
Speaker Change: Right.
Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your line.
Speaker Change: Ladies and gentlemen, this concludes your conference call for today, we thank you for participating and ask that you. Please disconnect your lines.
Speaker Change: Okay.