Tecsys Inc

TSX:TCS

Earnings Call Transcript 2021-Q1

[Operator]

Good afternoon, everyone. Thank you for standing by. Welcome to Tecsys First Quarter Fiscal 2021 Results Conference Call. Please note that the complete first quarter report, including MD&A and financial statements, were filed on SEDAR earlier today. All dollar amounts are expressed in Canadian currency, 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'd like to remind everyone that this call is being recorded on Thursday, September 10, 2020, at 1:00 p.m. Eastern Time. I'd now like to turn the conference over to Mr. Peter Brereton, Chief Executive Officer at Tecsys. Please go ahead, sir.

[Peter Brereton, CEO, President & Director]

Thank you, and good afternoon, everyone. Joining me today is Mark Bentler, our Chief Financial Officer. We appreciate you joining us for today's call, and we hope that everyone on this call, along with their families, is safe and stayed safe during this unprecedented COVID-19 pandemic period. Before we get into some of the specifics of the performance this quarter, I want to make some comments on the pandemic. Whereas many companies have struggled through the initial stages of the pandemic and are now just barely recovering, we have thrived. We feel honored to be in a position to enable our customers to better serve their customers. Unlike some of our more general solutions competitors in the supply chain, our focus on health care and the digital economy has really helped us. Our bookings during the first quarter of fiscal 2021 continue to be very strong across a broad array of segments, and we remain encouraged that this leading indicator points towards continued performance momentum during the foreseeable future. The strong results we are about to discuss today are broadly based with growth coming from all areas, naturally driven by our SaaS strategies. This success in unprecedented times would not be possible with the incredible effort of our global team. I would like to thank every single Tecsys team member for continuing to work effectively and safely in this new normal. I'll now summarize some key themes of the first quarter of fiscal 2021 and the results of operations. Mark will then walk us through the financial results in more detail. And finally, I will comment on our outlook, followed by a Q&A session. Two key highlights I'd like to focus on revenue, where I'll touch on both growth and quality of that revenue and our pipeline. First, this is our sixth straight quarter of record revenue. And recurring cloud maintenance and subscription revenue represented our largest and fastest-growing revenue stream in the quarter. As we continue to emphasize recurring revenue it's scaling up relatively quickly due to our ongoing strategic shift to SaaS in all of our markets. I think it's important to emphasize that these revenues are coming from 3 areas. The most obvious SaaS growth comes from winning new accounts. But we also gained new revenue from current large clients converting their licenses to SaaS and some existing customers expanding SaaS. We think it's important to note that these SaaS growth vectors are occurring broadly across multiple lines of business and in all geographies where we compete. This leads me to my second point, our pipeline. Supply chains everywhere are in flux due to the pandemic and also strains due to shifting trade agreements. Everywhere we look in all sectors, companies are attempting to bolster technology to become more nimble in the face of new uncertainties. Tecsys solutions are increasingly recognized for creating supply chain flexibility. As a result, we are seeing momentum in our pipeline in all lines of business from both new and current customers. Some global customers who may have started with a single facility are now expanding in multiple jurisdictions. Others who may have started with a few modules are now expanding a Tecsys footprint to better equip their supply chains. Our momentum is strong and while continuing to invest in the expansion of our own services organization, we are also investing in the expansion of our partner ecosystem. This is beginning to truly help us to respond to increased demand. The global opportunity in front of us is massive, and we plan to exploit it. Mark will now provide further details on our financials for the year. And well, just the quarter actually, we're in Q1 after all. So details on the quarter. Thanks, and over to you, Mark.

[Mark J. Bentler, CFO & Secretary]

Thanks, Peter. We are pleased that our performance for the first quarter of fiscal 2021 was not materially impeded by the COVID-19 pandemic. What was most encouraging to our outlook is record revenue, continued strong SaaS bookings and growing backlog. Here the first quarter results in more detail. Total revenue was a record $28.1 million, 16% higher than $24.3 million reported for Q1 of 2020. And as Peter mentioned, also our sixth straight quarter of record revenue. Our 2 largest revenue streams, professional services, and cloud, maintenance and subscription revenue both experienced strong double-digit growth, and we saw strength in all revenue streams. Driven primarily by SaaS deployments, cloud, maintenance and subscription revenue increased 25% year-over-year to $12.3 million in Q1 of 2021, up from $9.8 million in Q1 of 2020. Leading this increase was SaaS revenue, which increased 121% to $3.8 million in Q1 of fiscal 2021 compared to $1.7 million in the prior year quarter. Professional services revenue for the first quarter was $11.2 million, up 15% from $9.7 million reported for the same quarter last year, driven primarily by backlog deployment. Third-party products revenue increased in the first quarter by 9% to $4 million from $3.7 million reported in Q1 of 2020. While proprietary product revenue, driven primarily by license revenue, was $0.6 million, up 45% from $0.4 million in Q1 of 2020. We do continue to have certain customers and prospects that purchase perpetual licenses, and we expect this to continue in the future. Strong bookings continued in the quarter, SaaS bookings on an annual recurring revenue basis increased to $2.4 million, up 524% compared to a low Q1 comp from last year. SaaS bookings were highlighted by a new hospital network, a significant international migration to SaaS in our existing complex distribution customer base and a major add on to an existing customer in that same vertical. Professional services bookings were up 90% in Q1 of fiscal 2021 to $14.1 million from $7.4 million reported for the first quarter of fiscal 2020. Our annual recurring revenue at July 31, 2020, was $49.3 million, up 29% compared to $38.3 million at July 31, 2019. Of course, for us, SaaS is a key driver for annual recurring revenue growth, and we've begun to focus on what we call contracted SaaS backlog as a key performance indicator. Recall that the company enters into SaaS subscription agreements that are typically multiyear performance obligations with the regional contract terms of 3 to 5 years. Contracted SaaS backlog represents revenue that we expect to recognize in the future related to firm performance obligations that are unsatisfied or partially unsatisfied as of a particular date. As an example, if we signed a $500,000 annual SaaS contract with the 5-year term on July 31, 2020, that contract would represent a contracted SaaS backlog on that date of $2.5 million. 1 year later, that contract would represent contracted SaaS backlog of $2 million, et cetera. As of July 31, 2020, our contracted SaaS backlog was $57.0 million, up 10% sequentially from $52.0 million at the end of the prior quarter. That was ended April 30, 2020, our year end. Moving to professional services backlog. At July 31, 2020, our professional services backlog stood at $38.1 million, up 9% sequentially compared to $35.0 million at April 30, 2020. We believe this backlog will support continued strength in professional services revenue in the coming quarters. For the first quarter, total gross profit increased to $13.5 million, up 17% from $11.5 million reported for Q1 of 2020. Total gross profit margins remained stable at 48%, which means that total gross profit grew in line with our revenue growth. Switching now to our expenses for the first quarter. Operating expenses increased to $11.5 million, higher by $0.5 million or 4% compared to $11.0 million in Q1 2020. Operating expenses increased as we expanded headcount in sales and marketing and research and development. This increase was tempered by lower travel costs due to the COVID-19 pandemic. We also incurred $0.4 million of restructuring costs in Q1 of last year as we completed the integration of our acquisitions. This overall increase in operating expenses is in line with our stated strategy of investing in sales and marketing, and research and development in order to exploit the momentum that we are seeing in the market. Profit from operations was $2 million compared to a profit of $0.5 million reported for Q1 last year. The increase in profits was a result of higher levels of professional services and cloud, maintenance and subscription revenues which provided stronger margin contribution. Higher product margin contributed modestly to increased profit, which was also positively impacted by lower restructuring costs, favorable impact from foreign exchange and lower travel costs due to the covenanting pandemic. Adjusted EBITDA was $3.5 million in Q1 of 2021, up 76% compared to $2.0 million in Q1 of 2020. Net profit was $1.2 million or $0.09 per share in Q1 2021 on a fully diluted basis compared to a loss of $0.3 million or $0.02 per share reported for the same period in fiscal 2020. We ended the first quarter with a strong balance sheet position. At July 31, 2020, we had cash and cash equivalents and short-term investments of $36.0 million compared to $37.5 million at year-end and debt of $10.5 million compared to $10.8 million at year-end. I will now turn the call back over to Peter to provide some outlook comments.

[Peter Brereton, CEO, President & Director]

Thanks, Mark. The positive growth trends set in fiscal 2020 are continuing into fiscal 2021. Not only are we reporting record financial performance, but it's heartening to know how broad-based this strength is in the business. As an indicator of future performance, we can look to our fiscal 2021 pipeline of business. We entered the fiscal year with a strong pipeline, and the pipeline has grown another 5% or 6% over the generally quiet summer months. We are seeing shorter sales cycles and great activity across all segments, both among current customers and new opportunities. We plan to exploit market opportunities by accelerating our investments in channel and direct sales development and marketing programs to boost our ability to gain more market share rapidly. Over the coming year, we will intensify channel relationships, such as Workday and accelerate our reach to other channel partners. We'll also continue to invest in research and development to ensure that we continue to have world-class products, catering to the needs of our customers and prospects. We are committed to continuing to make investments in these critical areas to maintain our momentum, which may impact near-term profit margins. We believe that slightly lower profit margins in the short term will be more than offset by gains in market share and revenue in the medium and long term. After a terrific fiscal 2020 for Tecsys, we are pleased that this first fiscal quarter of 2021 continues that trend. We believe that based on our bookings and backlog, the outlook for the remainder of the year appears to be the best yet. Tecsys has never been in a stronger financial position to weather future sudden market volatility if it were to occur. In summary, I want to remind analysts and our investors about our 3 key operational themes for the remainder of fiscal 2021, which has not changed from our previous call as we entered the fiscal year. First, we will continue to maintain a laser focus on developing and growing our SaaS revenue model, which is helping to scale annual recurring revenue streams rapidly. As I mentioned at the outset of this call, recurring revenue is now the largest revenue stream for the company. Secondly, we will continue to expand our partnership ecosystem. This is key for us to scale rapidly into the post-COVID market opportunities that I mentioned earlier. We now have partners working effectively with us in both North America and Europe. We will continue to invest so that we can enable them more quickly. From accelerated training programs to improve onboarding tools, we are determined to make our SI partners very successful. Thirdly, we plan on investing in all of our sales channels to exploit the momentum in opportunities coming at us. We also continue to expand and refine our omnichannel business platforms to service evolving needs in our health care supply chain, converging distribution and retail market segments. These efforts will help us to not only minimize customer churn, which is already extremely low but will also help us to expand revenue from current clients as we saw happening this quarter. Remember changes what drives our business, and the COVID-19 pandemic has accelerated the monumental change that was already underway and continues to turn traditional supply chain on its head. With that, we will open the call up for questions. Thank you.

[Operator]

[Operator Instructions] Our first question comes from the line of Amr Ezzat with Echelon Partners.

[Amr Ezzat, Analyst]

Peter, Mark, congrats on another solid quarter. If I may, I'd like to circle back to one of the slides from your AGM, the market opportunity slides. You guys shifted it to show us ARR instead of total markets. And I believe you said the total ARR opportunity is $600 million. But you also mentioned that your base account opportunity, $76 million, and that implies 17% penetration. I'm having trouble sort of reconciling these numbers with your current ARR of $49 million. So maybe you could help me and walk us through that $76 million number on that slide? And how should we interpret it in that 17% penetration rates? Maybe I misunderstood the numbers?

[Peter Brereton, CEO, President & Director]

Sure. What we're saying there, ever, is that of the $600 million total opportunity, which is 300 health care systems we're targeting at an average ARR opportunity of $2 million per health system, equal $600 million. We've signed 13% of the names. So we've got 13% of the 300 in our client list. We're actually a little bit above that now. We're probably closer to 14% but anyway. And then on the right that we're saying out of those names, call it 40 networks that we've signed. We are -- we have, in effect, deployed 17% into those names. So there is an additional $76 million of ARR to go get in those 40 accounts that we've already signed.

[Amr Ezzat, Analyst]

Okay. That makes more sense. Then how does that translate into that 17% penetration rate? Okay. I guess, what I'm understanding is that probably like very much related to your health care than when I'm thinking about your current ARR, $49 million, a big part of that is vertical outside of health care. Is that correct?

[Peter Brereton, CEO, President & Director]

That's correct and a lot of that is old maintenance revenue, right, like old-style maintenance revenue. So you've only got $15 million of pure SaaS in that number. I mean that's the fastest-growing piece of it, but it's actually still only a smaller chunk of that, right?

[Amr Ezzat, Analyst]

Fantastic. Okay. That makes sense. Okay. On to the quarter, pretty impressive [ pitching ] numbers again. You mentioned in your prepared remarks that it was pretty broad-based, but can you give us like any insights to the drivers there? What does this look like between base and new clients? Then any comments on the verticals that are sort of growing or…

[Peter Brereton, CEO, President & Director]

Mark, do you want to take that one?

[Mark J. Bentler, CFO & Secretary]

Yes, sure. I mean, Q1, our quarters kind of move around a little bit. If you look at Q4, we had really broad, strong sort of bookings tipped towards healthcare. I would say, in our Q1, in terms of key verticals that move the needle for us in Q1, complex distribution through a big add on deal, that we mentioned on the call, and through a migration deal, kind of drove some pretty significant bookings. We added 1 new hospital network in the quarter, but the -- more than 60% of the bookings in that quarter were from complex distribution.

[Amr Ezzat, Analyst]

And how does the split look like between base and new clients?

[Mark J. Bentler, CFO & Secretary]

Yes, it was very heavy. Again, tail of 2 quarters, compared to Q4, we had massive new customer bookings, which led -- really led bookings in an outsized way. This quarter, we had actually these -- a couple of our biggest deals were out of base. One was a big add-on to an existing SaaS customer in complex distribution, and one of them was a big migration deal. We also had several other big customers signing up for new projects. And the new customer signings in the quarter were actually lighter relative to even last year or last quarter.

[Amr Ezzat, Analyst]

Okay. Great. That's good color. Then on your OpEx number for the quarter, I realized, yes, that it's up year-on-year but sequentially, it's actually down. Is that due to the summer seasonality and lower travel? I mean my impression going into the quarter is that you guys might be layering in more investments to support your growth. So I was looking for OpEx to be higher quarter-on-quarter.

[Mark J. Bentler, CFO & Secretary]

Yes. I think there was -- there were a couple of things there. We did add-on quite a bit in the quarter, more than 20 additional net growth in headcount during the quarter. So we did add-on investments as we had indicated we would. I think the sort of the tailwind on that from a cost standpoint for us was in a couple of different areas. Number one, Q4 had sort of an outsized variable compensation component in it with bonus and commissions recorded in that Q4 period on the back of you'll remember some very significant Q4 bookings at the end of the year there. So that was one thing. And then the other thing, like you mentioned, COVID-19, I mean, it basically just -- it almost eliminated completely eliminated travel. By way of example, our reimbursable travel expense revenue, which is when we have people traveling to customers to go work on projects and things which is rebillable to the customer, and we account for that as revenue, and we also account for it as cost of revenue. In Q1 of last year, that number was over $600,000. In Q1 of this year, it was about $20,000. So clearly, travel, the impact on travel in the quarter was significant.

[Amr Ezzat, Analyst]

Okay. Maybe one last one that is more conceptual, let's say. When you guys sort of reflect on your recent success, what do you feel is driving these noble effects? Obviously, you've got a robust product, but you feel that a lot of it is based on you guys pushing SaaS, this is obviously a lowest ticket item. So it's an easier bullet to bite than an upfront license? Or is it the restructuring you've done like 2, 3 years ago through your sales team? Or is it the channel partnerships? I'm just looking to get your sort of general thoughts when you guys reflect over the last 5 or 6 quarters.

[Peter Brereton, CEO, President & Director]

I think, Amr, I would say that there's a few things there. One is we spent almost -- I mean, it's hard to believe how long it's taken. But we've spent 12 to 15 years building to a critical mass in terms of a complete solution for health care. But we are finally largely there. We now go into a health care system and present a solution that literally covers every element of supply chain. In fact, if I look at what our health care system is asking for now for us to consider, it's really sort of right around the edge of supply chain. In terms of core supply chain, we got every area covered. And so we finally have sort of that critical mass. So we're starting to see -- well, more than starting over the last year, we're seeing routinely deals been signed that are 3 to 4x the size of anything we'd ever signed in health care prior to that. So there's sort of, finally, a state of completion and readiness for purpose that we've really finally got to in health care. We've also got to the point where we are recognized in health care as a leader in health care. So those are really propelling a lot of opportunities there. The rebranding, I think, that we did, which we -- sort of Laurie McGrath led as she came in as new Chief Marketing Officer and led the complete rebranding, I think helped tremendously. We saw a huge upswing in the number of inbound opportunities coming in as we clarified our messaging to the market, simplified it. I think our messaging had been way too complicated, it had way too many different layers. We sort of built it one piece at a time over many years until we were the only people left that understanded it. So that sort of simplifying and rebranding really drove up the inbound side. The rest of the new team we brought in, Mark, in the CFO role, Bill, in the Chief Revenue Officer role and so on. These also sort of just reequipped us for the next phase of growth. So I've looked at myself, I've asked myself the same question sort of, okay, what was it? Was there one key element? And I think it's a combination, simplified messaging, stronger team that's sort of ready for this next phase of growth and the -- what's -- the completion of the product. That has coincided, and this is where there's a certain amount of just sort of fortuitous timing. All of that is coincided with a dramatic change occurring through the supply chain. I mean, a ton of the systems that are being run right now in supply chain, we're literally implemented in time for Y2K. So for those of us that remember Y2K, it wasn't all that long ago. But on the other hand, it's 20 years ago. So those systems are aging out. And meanwhile, the supply chain, the actual supply chain that these systems need to manage is changing fundamentally with what was offshore being brought back onshore and duty situations and trade barriers changing and now, of course, the pandemic driving a much more direct-to-consumer approach. So I think all those other things that I talked about, we managed to get them done. And got been done just-in-time for what is now a real acceleration in terms of the rate of change in supply chain in the industry. So all of it's combining, I think, to drive some pretty good numbers. So we're pretty excited looking forward from here. We feel like it's really continuing to come together.

[Operator]

Our next question comes from the line of Nick Agostino with Laurentian Bank Securities.

[Nick Agostino]

I guess if I could start last quarter when you guys printed on the cloud maintenance, and subscription side of the business, I think you indicated that the number would have been higher, but some of the revenue recognition was back-end loaded and that we would see the benefits of that this quarter. And I would assume that the strong effort you guys showed this quarter included that. So I was just trying to get some color maybe how much of a benefit that back-end loading provided this quarter and just a better understanding of the run rate on that side of the business?

[Mark J. Bentler, CFO & Secretary]

Yes. It's a good question, Nick. And yes, this -- there was definitely an outsized impact on quarter-on-quarter for this quarter, if we look at -- if I look at what happened historically on bookings in Q3 and Q4 and Q1. So I think a lot of that has flowed through into this kind of what you sort of see as the Q1 run rate. So that looking forward, I think you should be thinking about the stuff that we're disclosing on new SaaS bookings and sort of thinking about that as your sort of perspective view on what's going to be happening in that line. It's a little bit more complicated than that. I mean we still have some customers in our base that have signed up for SaaS that have committed customer usage or new seat metrics that are kicking in, in the future. But in terms of that explanation and that point that I made last quarter, I think we saw a big -- that big pop going to happen in Q1.

[Nick Agostino]

Okay. And then just looking at your gross margins, 48%. Overall, when I look at the services side, I believe that that blend in [indiscernible] professional services. Looks like it's staying relatively flat. So as you add more SaaS, I think the offset is you've got a lot of professional services, in general, to onboard it, which might be hurting your gross margins in the near term on the services side. And I'm just wondering what is the plan? How should we be looking at those gross margins near term and more still long term how do you guys look at professional services as far as the ability to drive kind of overall services side? Other words, do you have to offload some of that to your SIs?

[Mark J. Bentler, CFO & Secretary]

Yes. You kind of broke up a little bit there, Nick, but I think I got the generality of your point. I mean we had actually -- part of that Q1 last year, you kind of looking at the numbers, we had a pretty neat professional services margin in that quarter, which kind of impacts the comp a little bit this time. So kept things a little bit more flat. I think going forward, we're investing right now in making sure with all these customers that we've signed and they're going live and going up and making -- we're investing and making sure we have a good solid infrastructure under that, and we're not being shy about that because success is going to beget success here is sort of the way we look at it. In terms of your comment on partnering and how much can we handle versus how much is going to have to start going out to partners? I mean we've -- as Peter mentioned in his remarks, we have invested in managing the partner channel and establishing internal processes around training and just how we manage and interact with partners that is changing pretty dramatically right now so that we can continue to leverage SI partners and add SI partners that can take more and more services in the future. That said, we're also investing and we continue to invest in professional services resources ourselves to deliver projects. And I think looking forward, the future kind of looks like we'll continue to grow professional services to handle the more technical or product side of the implementations. That's going to continue. The question will be what's the pace of that growth versus how much goes to SIs for that kind of technical work. On the customer side, we're seeing a lot of SI work going kind of supplementing what customers would have typically done in the past with projects, which kind of helps projects move maybe a little bit more quickly and hopefully, a little bit more successfully as well. So hopefully, that answers your question a bit. In terms of looking down the path a bit into the future, our [ dot ] in the law is definitely margin expansion here created by expanding SaaS and leveraging a solid infrastructure and our cost per customer on underlying infrastructure that will decrease over time, but we kind of are looking for that a bit into the future.

[Nick Agostino]

Okay. And then my last question. Can you just speak to what third parties that you are affiliated with maybe what their sales contributions look like in the quarter? And also any penetration, but you may want to highlight with regards to the European market as far as maybe new wins or even lighting up new customers?

[Peter Brereton, CEO, President & Director]

Yes. First of all, Nick, on the first question, we are -- I would say the impact on actual inbound opportunities and new account wins through partners is still relatively light. Over the last 12 months, I think we've landed 3 accounts sort of that have literally been brought to us by partners. We've had a couple of other accounts where the wholesale cycle has been accelerated through our work with partners. But as we look at what's in the pipeline now, we -- that trend continues to pick up. So like even though in the last year, it was relatively low, it was probably still up 2 or 3x from the year before. And as we're looking forward from here, we now have active opportunities that we expect to close in the second or third quarter that were brought to us by some of the systems integrators and implementation partners. So we're -- it's a funny process that goes on because, in essence, we end up sort of pushing some of the consulting work out to SIs and partners. As a way of sort of dealing with growth and giving our customers better options in terms of implementing the software. But at the same time, it actually, of course, further adds to the growth as they bring then new opportunities of their own back into the pipeline. So that's continuing. In terms of Europe, the work in Europe is still largely on the omnichannel and DOM side, I would say. One of the projects we signed in the first quarter, though, does call for implementation and rollout in the U.K. and Germany. So we will -- our work in Europe does continue to grow. But from a partner standpoint, I would say our active partners in Europe are really still very specifically in retail and DOM.

[Operator]

[Operator Instructions] Our next question comes from Gavin Fairweather with Cormark.

[Gavin Fairweather, Analyst of Institutional Equity Research]

I wanted to start out on the base conversions from on-prem to SaaS. I mean I've always kind of thought about that as being kind of a longer-term trend that was going to pick up for you guys. So I guess just curious after your success this quarter on the distribution side, wanted to check-in and kind of see how many conversations are going on that front beyond the ones that you did in Q1. How that distribution works out between the distribution side and health care? And how you see that playing now?

[Peter Brereton, CEO, President & Director]

Yes. I mean, I think, Gavin, at this point, we I think it's safe to say that we are not yet seeing sort of a wholesale move for people to migrate away from on-prem to our SaaS offering. There -- if they've already invested in on-prem infrastructure and people and have the right teams, everything to manage the on-prem systems that there's sort of no rush to move to SaaS. What we are seeing is companies that are at a stage of having to reinvest sort of deciding to instead shift to SaaS. And we've now seen really 2 fairly significant migrations to SaaS. And in both cases, it's been sort of they reach the end of their own internal investment cycle. They've got some stuff that's now sort of fully depreciated. It's time to decide on what are they going to do for the next sort of round? Are they going to reinvest, upgrade all their infrastructure, upgrade their security capabilities et cetera, or are they going to shift to SaaS? And sort of if that natural decision point hits, they end up migrating to SaaS. In summary, the biggest driver in the shift to SaaS is security. It's increasingly difficult for companies to manage their own security and actually keep their data and infrastructure safe. So that's probably the biggest driver behind it. But it is very much time to their own sort of natural cycle of just reinvesting for the next sort of 5 years or whatever the case may be when they get to that fork in the road, they end up saying, let's not reinvest, let's go with SaaS.

[Gavin Fairweather, Analyst of Institutional Equity Research]

And given that backdrop, is it pretty much like a new project? Like it's not like you're just copying the data and then that [ meets ] your data and it's like they need kind of refresh on the software side as well. It's kind of like a new implementation. Is that the right way to think about it?

[Mark J. Bentler, CFO & Secretary]

Yes. It's kind of like a new implementation. But at the same time, it's not like switching completely switching vendors. I mean, our SaaS software operates and behaves very similarly to our on-prem. I mean, if you were using our old financial solutions on-prem, and now you're shifting to our SaaS solutions, a couple of days of training you are good to go. If you're using our old -- our on-prem warehousing solution with all the visual capabilities and so on, you've got that same capability in SaaS. So there is a migration process. There's a data validation process. Often, there's data cleanup. Because a lot of systems have been running for a while, tend to build up sort of way too much out of date data that needs to be cleaned up prior to the move. So that effort goes on. So it's a major project, but it's not the same as implementing a brand-new solution.

[Gavin Fairweather, Analyst of Institutional Equity Research]

Okay. That's helpful. And then on the services side, the bookings are strong around $14 million this quarter, obviously, a nice book still there. I guess I'm just kind of curious what kind of billing capacity does your current kind of headcount have on the services side on a quarterly basis? And are you finding that the efficiency or productivity of that team has kind of gone up? Have you transitioned towards this remote implementation model?

[Mark J. Bentler, CFO & Secretary]

Yes. I'll take that one, Peter. Yes. I think in terms of the capacity of the existing team, I mean, we're seeing what we think is pretty good utilization levels. I think there's still a little bit of headroom in our utilization levels. But we're growing. We're growing the team, a lot of our headcount growth that we experienced in Q1 and even Q4 of last year was in professional services. So I think there's still some -- there's some capacity in that team for sure, but we're adding to it pretty quickly.

[Gavin Fairweather, Analyst of Institutional Equity Research]

Okay. Then are you finding that particular consultant can be more effective and productive under this remote model? Or is it effectively the same as before?

[Mark J. Bentler, CFO & Secretary]

That's a good question. I mean I think it's -- I mean what we're seeing and just in the numbers, it's definitely not going backwards, it's definitely going -- it's not going backwards in terms of productivity. How much more predictive are they -- how much more productive are they by working from home instead of going to the customer side. I think that probably depends on the specifics of what's going on with the project, but we haven't seen anything really negative from a productivity standpoint that's been happening from, as a result, work from home, I would say, in general.

[Operator]

Our next question comes from Edson Lai with GMP Securities.

[Edson Lai, Associate]

My first one is related to the M&A environment. I was wondering if you can give us an update there in terms of the landscape, valuations and how your pipeline has progressed in the past few months? And any insight on the specific verticals you're looking at, too, would be helpful. I think you guys mentioned in the last call that you guys were looking at potentially expanding your geographical footprint in Europe and APAC.

[Peter Brereton, CEO, President & Director]

Yes. I mean, so far, I have to say, maybe it's a little bit like the Canadian real estate story. We thought with this pandemic hitting that the valuations would be impacted significantly, and there might be some real sort of opportunities to scoop up a good acquisition or 2 in the face of this sort of global slowdown and major recession that's underway. And we just haven't seen that. The valuations have held up. The companies that we have seen come up for sale are priced to what we consider quite full value pricing. And so we haven't seen anything that sort of entice us to move from a value standpoint, so we continue to look. We continue to look for opportunities in Europe for further expansion and Asia Pac geographically. We also continue to poke at the health care market in terms of the North American market for ways to expand our offering there. At the same time, there's no question, that bar is higher for us right now on acquisitions than it has been at other times in the past. And the reason for that is, I mean, if you look at -- I mean we report -- we just reported 16% revenue growth, but if you adjust for the fact that we're phasing from the old license model into the SaaS model. There's a significant amount of business growth buried in there that just isn't showing. So you're probably -- your real organic growth rate right now is running probably in the mid-20s or something like that. So the opportunity we have in front of it in the markets we're pursuing seems to us to be very hot, very accretive to value. And so unless the acquisition, we come across an acquisition that is just sort of very, very accretive looking, we're keeping the management teams focus on driving the opportunity in front of us.

[Edson Lai, Associate]

Okay, perfect. That's super helpful. Shifting over to the EBITDA margins. It was super strong this quarter at 12%, which was ahead of your medium target of 10%. I know it's been volatile in the past. So wondering if you could speak to how sustainable this 10% plus EBITDA margins are? And how far are you guys in this investment cycle in direct sales and marketing and R&D? Are you guys closer to 10%, 25% or even 50% of the way there?

[Peter Brereton, CEO, President & Director]

You want to take that one, Mark?

[Mark J. Bentler, CFO & Secretary]

Yes, I think -- sure, yes, I'll take that. I mean, the EBITDA margin is a little bit tricky for us to sort of crystal ball here, I think. We still have the sort of license equation that's in our that's in our world and a license deal turning into a license deal versus a SaaS deal can have some pretty significant impacts on our margins still at these margin levels for sure. So I think in terms of where we're at in investment and where -- we're still looking at and I think there's probably some latent growth that's going to be happening in adjusted EBITDA in general, that is going to be probably consumed by what we think is required investment in market opportunity. I mean, we still have quite a number of open heads that we're looking to fill in sales roles, particularly in health care, but right across the verticals. So I think we're not looking at a scenario where that investment is going to substantially outpace EBITDA growth, but it's definitely going to -- or hamper -- massively hamper EBITDA growth, but it's going to definitely slow down any margin expansion in the near term, I would say.

[Edson Lai, Associate]

Okay. Shifting over to the hospital win in the quarter. I was wondering if you can talk about whether that's Workday related or not? And then just a general update on the Workday partnership as well. I think in the last quarter, you said there was a go-live with a large Indiana network. And also a first joint go-live project with Workday. So any color there would be helpful?

[Peter Brereton, CEO, President & Director]

Sure. The network that we won in the first quarter was not Workday related. It was a network that has been investigating the supply chain, planning to strengthen their investment in their supply chain for actually a considerable period of time. They were expecting to move ahead with it in really the February, March time frame, maybe April time frame and then sort of the -- they went through a pretty severe COVID wave in their area, put everything on hold for about 90 days. And then as they came out the other side of that, they signed off to get that project moving. The -- in terms of -- in general the Workday, I feel like, to some extent, it's following a typical pattern we often see with sort of new initiatives in that we put the agreement together with Workday. We ended up signing 4 accounts with Workday. We now have discussions going on with quite a number of other accounts, but I think a lot of them want to wait and see how the first few go-lives go. We have had the 1 go-live that went live about 4 weeks ago now. They are still in the process of sort of stabilizing the actual work interface that was developed to -- with some effort on Workday's part and our part to create a real-time interface between the systems is working very, very well. The stabilization that they're going through is more than normal stabilization that occurs when you sort of automate a segment of supply chain that hasn't been automated that way before. You got data issues and user training and sort of lots of those kinds of things to work through, but they're coming along well. The next -- I think the next go-live is in October at this point, but it certainly looks like by Christmas time, we should have 3 of them live. And it's typically at that phase that we start to see sort of the next wave of opportunities sort of willing to come in. So we'll see how that goes. We're happy to see these go-lives now actually happening. And hopefully, we'll see some more new opportunities coming there in the near term.

[Operator]

And I'm showing no further questions at this time.

[Peter Brereton, CEO, President & Director]

Okay. Well, thank you all for joining us today. And again, if you have additional follow-up questions, feel free to reach out to Mark or I, and we will look forward to talking to you in December, first week of December I think it is when we release our Q2 numbers. Thanks again, and have a good afternoon.

[Operator]

That does conclude the conference call for today. We thank you once again for your participation and ask that you please disconnect your lines.