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Tecsys Inc
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Good afternoon, everyone. Thank you for standing by. Welcome to the TECSYS' Second Quarter Fiscal 2019 Results Conference Call. [Operator Instructions]Please note that the complete second quarter report, including MD&A and financial statements were filed on SEDAR after market yesterday, November 29, 2018.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 remind everyone that this call is being recorded on Friday, November 30, 2018, at 8:30 a.m. Eastern Time.I would now like to turn the conference over to Mr. Peter Brereton, Chief Executive Officer of TECSYS. Please go ahead, sir.
Thank you, and good morning, everyone. We appreciate you joining us for today's call. Joining me today is Mark Bentler, our CFO, who started with us this past September.I'll start by summarizing the key events of the quarter, Mark will then review our Q2 financial results and then we'll take your questions.Last night, we issued our unaudited 2019 second quarter financial results, and a copy of those results is available on our website at tecsys.com. During the second quarter of 2018, we had strong business development results and achieved the highest contract bookings in company history, increasing by 42% over the same period last year. This is a clear indication of the momentum in our business, particularly as the U.S. healthcare industry is moving towards a more normalized procurement environment. It's important to note, however, that it will take time before the contract bookings convert into revenue. In general, the revenue from a contract is realized over a period of several months, but larger, longer-term contracts result in a longer rollout of revenue. We are very happy with these record contract bookings and the sustained future revenue growth that they represent.The increase in bookings largely came from our base IDNs or hospital networks, with 196% year-over-year growth, in essence, tripling the bookings over the same quarter last year in this segment of our business, and demonstrating that our foundation remains strong as we continue to see signs of stability and a return to growth.As we have said previously, our hospital base represents approximately a $600 million opportunity, and we estimate we've only achieved 12% penetration. Enhancing and adding to our customers' current TECSYS solutions will continue to be a focus of our sales force.Our first pharmacy point-of-view solution went live at the end of the quarter. This was the result of several years of effort and collaboration between our implementation team, our R&D team and our client. This is an important offering for us and enables hospitals to have accurate, real-time information on one of the most significant cost centers in their operations and eases compliance with the U.S. drug supply chain security act. We signed our second pharmacy contract during the quarter, indicating the growth potential for this solution.On the complex distribution side, in November, we were very pleased to announce that we expanded our omnichannel distribution capabilities with the acquisition of OrderDynamics, a leader in out-of-the-box distributed order management software. The combination of their best-of-breed DOM solutions and the functionality of our existing supply chain management suite will provide retailers, brand owners and third-party logistics companies with an end-to-end product, enabling them to succeed in today's market.The trend we are seeing today has been referred to as the amazonization of the supply chain. Businesses are receiving thousands of orders via e-commerce and must decide quickly how to deliver to the customer from the warehouse, from a store or possibly direct from a vendor. OrderDynamics provides a solution that solves that problem and will interface seamlessly with our supply chain management solutions.We believe that the combination of our 2 businesses will enable us to both expand our reach in a fast-moving retail market and grow our existing footprint in the key markets of North America, Europe and Australia. Our sales team is already engaging our existing customer base as well as new 3PL providers to demonstrate the possibilities.We acquired OrderDynamics for $13.4 million and funded the purchase with existing cash. OrderDynamics has forecast revenue of $7 million for their fiscal year ending March 30 -- 31, 2019, 30% growth over the previous year.With a forecast EBITDA loss of $2 million, we are expecting OrderDynamics to have a positive impact on combined revenue growth and a short-term negative impact on combined EBITDA.As you've heard so far, we have been establishing a strong foundation for future growth in both our healthcare and complex distribution businesses. Our pipeline remains strong, and we'll be working to capitalize on our strong base for the remainder of fiscal '19 and into fiscal 2020.Mark will now provide some detail on our financials for the quarter.
Thanks, Peter. Second quarter revenue increased slightly to $18.2 million, up 1% from $18.1 million in the same period of fiscal 2018.Services revenue for our Q2 2019 was $6.9 million compared to $7.9 million in Q2 2018. During the second quarter of fiscal 2018, we recognized $1 million of deferred professional services revenue due to the termination of a contract and its associated future obligations.Proprietary product revenue increased by 50% in the quarter to $2.5 million from $1.6 million in Q2 2018, largely as a result of higher proprietary software revenue.Our third-party product revenue for Q2 2019 was consistent with Q2 2018 at $1.4 million.During the second quarter of 2019, cloud, maintenance and subscription revenue increased by 6% to $6.8 million from $6.4 million in the same period of fiscal 2018. This increase was primarily a result of higher maintenance revenue consisting of maintenance on new license sales and price increases as well as higher hosting revenues.Gross margin in Q2 2019 increased slightly to $9.5 million or 52% of revenue compared to $9.4 million or 52% of revenue in the second quarter of fiscal 2018. This increase was a result of higher product margins of $0.7 million, which was offset by lower service margins of $0.6 million.Operating expenses for Q2 2019 were $8.7 million compared to $7.8 million in the same quarter last year. This increase in operating expenses was largely a result of the company making investments in sales and marketing and research and development to support bookings and revenue growth as well as costs related to the acquisition of OrderDynamics and stock-based compensation expenses.Sales and marketing expenses were up about $0.2 million to $4.1 million as a result of increases in marketing program costs, recruitment fees and commissions, partially offset by lower employee costs and severance compared to the same period last year.Net R&D expenses were $2.7 million, an increase of $0.3 million when compared to Q2 2018, primarily due to higher employee costs, recruitment fees and consulting expenses compared to the second quarter of fiscal 2018.G&A expenses were $0.3 million higher at $1.9 million in Q2 2019 as a result of incurred costs of $0.1 million relating to the acquisition of OrderDynamics, share-based compensation expenses of $0.1 million and other legal and professional fees.Profits from operations declined in the quarter to $0.8 million compared to $1.6 million in Q2 2018.Recall that in Q2 2018, we had a $1 million onetime recognition of deferred professional services revenue. When this is backed out, profit from operations for Q2 2019 would be 38% higher than Q2 2018.This increase is a result of higher proprietary software product revenue and cloud, maintenance and subscription revenue, partially offset by higher operating expenses.EBITDA was $1.4 million for the second quarter of fiscal 2019 compared to $2.2 million in Q2 of 2018. Again, we exclude -- if we exclude the $1 million Q2 recognition of deferred professional services revenue, EBITDA in Q2 would be 20% higher than Q2 2018.The company recorded profit of $0.6 million or $0.05 per share in the second quarter of fiscal 2019 in comparison to a profit of $1.4 million or $0.10 per share in the second quarter of fiscal 2018.We ended the quarter with cash and cash equivalents as well as redeemable short-term and long-term investments of $21.7 million compared to $23.5 million at the end of Q4 2018. The decrease is mainly due to changes in noncash working capital and also the payment of dividends.I'll now hand the call back to Peter.
Thanks, Mark. Despite our slower revenue growth in the first half of our fiscal year, the record growth in contract bookings and our record backlog of $51.7 million bodes well for the future. Our book-to-bill ratio is 120% year-to-date and 116% on a trailing 12 basis. In fact, our total bookings, which includes recurring for the last 12 months, is just shy of $80 million. On the healthcare side, the previously mentioned normalized procurement environment will drive continued contract bookings both with our base and with new IDNs. We also expect increased interest in our pharmacy point-of-view solution as it begins to be implemented at a second site. We expect to see continued steady growth in complex distribution, particularly as we introduce an integrated OrderDynamics product to our customer base.With that, I will open the call up for questions.
[Operator Instructions] Our first question comes from the line of Nick Agostino with Laurentian Bank Securities.
I guess, first question would be just on the OpEx side. Obviously, it came in at $8.7 million, I think, for the quarter, you did allude to a higher, more spending on sales and marketing and R&D. Can you maybe give us some guidance as to what the run rate will be going forward, including the fact that you've now got OrderDynamics within the fold?
Yes. I mean, the existing run rate -- I mean, the numbers reported in the quarter, there's no question some of those numbers are up and will continue to stay up, Nick. But there's about $400,000, sort of, exceptional stuff in the quarter from the standpoint that there is some severance in the quarter, there was -- as well there was substantial recruiting fees in the quarter. And there was also like -- commission is about $200,000 high compared to where it usually is just because of the record bookings.
Okay. So you're suggesting with pre-OrderDynamics, maybe we should be looking at something in the order of, I don't know, call it, [ 8 1 ] ,[ 8 2 ], [ 8 3 ] as a sustainable run rate. Is that fair?
Yes. I mean, we are continuing to try to crank up sales and marketing, but that's a gradual sort of increase over a period of time. So yes, I mean, on a normalized -- I don't know, [ 8 2 ], [ 8 3 ], something like that is probably a more normalized number.
Okay, great. And then just on the -- because you mentioned there's about $400k of, I guess, extraordinary expenses in the quarter itself. Were those -- if we were to look at your EBITDA, you reported at $1.4 million. I think I backed out a couple of onetime, well, stock option and also the -- your costs associated with the M&A. Is there an additional $400k on top of that, which you guys view as a onetime in nature. And therefore, should I be looking at your EBITDA for the quarter probably somewhere in the order of $2.1 million? Is that a fair comment?
There's probably -- you could -- whenever you get into adjusted EBITDA, it's always a question of how far do you adjust it. I mean, the commissions are up a couple of hundred thousand due to exceptional bookings. On the other hand, I'd love to repeat the exceptional bookings, in which case the commission would also continue to be higher, right? So I don't know, it'd be sort of up to you to decide what to back out of there. But certainly, I would say, a normalized -- say, as a normalized number, yes, you could either probably assume there's another $400,000 in there.
Okay. I guess, on the severance then in the quarter, how much was that roughly?
Well, due to the fact that everyone here at TECSYS knows who is let go, I'd rather not give you a specific number there other than just to say that in combination with the $200k of commissions and recruiting fees and severance, the total ends up around $400,000.
Okay, understood. And then just maybe switching gear on -- just on the acquisition itself. Can you maybe just talk about -- is there another -- when you look at -- I think you alluded to in the past that this was an area that your -- that you're seeing your customers maybe demanding or you saw an opportunity to get into. Is there any other gaps that you see within your complex distribution offering that maybe you might target as another area for M&A?
No, I mean, no, other than geography. I mean, we have been looking for over a year to fill this distributed order management gap. And beyond that, the other area we're looking is to expand our geographic reach, and that's an area where we continue to look.
Our next question comes from the line of Justin Keywood with GMP securities.
Just on the lag with recognizing the revenue from the bookings, I would think this is because it's coming in the form of SaaS versus upfront license form as it was prior. Is there anticipated, kind of, time when we could start to see that, that increased revenue, just given the bookings keep trending up pretty strong?
Yes. We're -- I mean, the way we see it and as you know, we don't give specific forward-looking forecast, but we are looking at these projects and saying these larger projects are all sort of starting to ramp up now, but it's really our fourth quarter by the time they are starting to hit fuller stride. So we're anticipating it'll be our fourth quarter, we think you're going to start to see the services number really starting to move up as we take advantage of that backlog. And as we move into next year, it should be hitting full stride. I mean, that's basically the way it looks today. And it -- some of it has to do just with the fact that some of them are SaaS contracts, but some of it just has to do with the fact that a number of these have been very large contracts. I mean, if you -- if we signed a $1 million contract that's got $500,000 of professional services in it, typically that gets started within about 60 days and is all wrapped up in sort of 6 or 8 months. Whereas when somebody signs a $6 million agreement that might include $3 million or $4 million of professional services, typically it takes them a number of months after they've given final approval to the project to even get their own team in place, so that they're ready to tackle such a large project. So we tend to have a greater delay before the project actually launches, and then the project tends to run over a couple of years.
Understood. And then on the pharmacy, it was good to hear that the product was launched and also with the second contract. I was wondering if you could quantify what this opportunity is? And also, how the sales cycles are compared to the traditional product sale?
The sales cycle for new accounts for pharmacy, let me start there, I don't think is any different than we've seen with other hospital product lines. And that if it's a new account, you're talking an 18-month to 2-year sales cycle. If it's an existing base account, it's more of a 9- to 12-month sales cycle. So sort of half the time if it's a base account. The -- from the standpoint of the opportunity, we're still really getting a handle on that. Certainly, it looks as though from a total contract standpoint, you're looking at sort of a couple of million bucks per hospital, a combination of license fee, maintenance or SaaS fees in some cases and consulting services. So it's a very large number. I mean, if -- in our base accounts -- just in our base accounts, it's -- you're talking potentially hundreds of millions. And in the broader new account market, it's a very large number. But we're -- say -- right now, we've got a sample size of 2, so we've still got a lot to learn about that market space. Certainly, the go live was a great go live. Go lives always have some interesting moments, this one was no exception. But a great go live, and we're sort of rolling ahead there. And now as I say, the second account signing on literally within a few days of the go live, the second signed on. So a good sign.
Okay. That's good to hear. And then just on the OrderDynamics acquisition, I'm wondering how we should look at the progression of EBITDA. If it's a negative 2 now, I assume there's some synergy opportunities. Just how should we model that over the next year or 2?
Yes. There's -- there are some synergies that we're looking at. I mean, office space synergies would be one and so on. There's also some synergies in the areas where they would have needed to hire that now they won't because we can provide them those services in IT and infrastructure and so on. But they -- that company, when we acquired them, was at a -- definitely at a growth inflection point. As we mentioned in our press release, just their transaction platform processed -- I think, it was 144% more volume this Black Friday week than last Black Friday week. So the thing's growing at a great clip. So our focus really is to continue to ensure that rapid growth. And we anticipate that those EBITDA losses will tail off over the next probably 18 months, but we are not looking at sort of a rapid correction to the EBITDA situation. We really want to continue to see very rapid growth in that platform. It's got a very exciting position in the market. We think it's well positioned for some of what's happening in that market space. They won some of the best brand names in the world and are continuing to roll out around the globe with those brand names. So we definitely want to continue to feed the growth cycle with that one.
Our next question comes from the line of Gavin Fairweather with Cormark.
Just -- maybe if you can give us an update in terms of where you are on your sales team investment. I believe you have been working on bringing some new leadership and then add some more bodies. How far through that process are we now?
Not very far. I mean, we're continuing to search to expand the leadership capabilities. We think we've got some interesting possibilities there, but we have not finalized anything yet. And we're expecting to add more sales capacity once we have that expanded leadership structure in place. So we've got -- we've -- quite honestly, we've -- I would say, we've slipped 60 days on that from where we wanted to be. We have just had trouble finding the right candidates to drop into place. I'm delighted, of course, with the fact that in spite of that, the -- our sales team has been outperforming against plan year-to-date, but we definitely still have some work to do there.
Okay, that's fair. And then you talk about going to market with an integrated solution with OrderDynamics in the next -- for complex distribution. Maybe you can just speak to how much effort needs to happen on your end in terms of making sure that the 2 systems are working together in an integrated fashion, so that you can go out to market with that?
Yes. That will be a progressive thing as we bring those systems together. The initial link, which really just involves them, the OrderDynamics platform receiving the order out of an e-commerce platform. Typically, these orders might come in through Magento or the salesforce e-commerce platform for instance or Shopify. The orders come in through that kind of a platform, then drop into OrderDynamics. OrderDynamics does all the sort of sorting out of the logistics around it. Do we ship it from a store? Do we -- is it pick up in store? Do we ship it from warehouse, et cetera? It processes the financial transactions, handles all that. And then it needs to just drop that order now all figured out down into our platform for actual fulfillment. That -- they have pretty standardized APIs around that interface, and we have pretty standardized APIs to receive that kind of an order. So that initial connection looks to be very straightforward and can be done very rapidly. Over time, are there opportunities to integrate more deeply? Yes, we think there are. And -- but typically, that will happen over a couple of years. As we get sort of more customer experience with it and more proof cases, we will continue to tighten it up. But that initial critical link can happen very fast.
Okay. And then just lastly for me, maybe you can just put some more meat on the bone in terms of what the acquisition means for your complex distribution business from a high level, both in terms of the cross-sell opportunity and then on new opportunities as well?
Sure. I mean, the cross-sell opportunity, I think, there's really 2 interesting categories there, possibly 3. But one is, our -- the clients we have at our complex distribution customer base that are what we would call brand managers. And these are companies that have traditionally sold through brick-and-mortar but are now starting to sell direct to consumer and are finding the incredibly high volume of tiny little orders is kind of overwhelming their existing way of doing business. So we've got a number of those in our client base, and this is a great opportunity to help them solve that problem. We also have third-party logistics companies in our customer base that are doing this on behalf of those kinds of companies. And so that's an interesting opportunity. On the retail side, which is where OrderDynamics generally sits, they've got clients that really need to add a warehouse management solution and would prefer not to go to some of the solutions out there like Manhattan that are extremely expensive and very complicated. So that sort of opens up a possibility on their side. The other area, the third area that we're just sort of exploring to see what the level of interest might be is we've got a number of our hospital clients that know they have to get into post-discharge fulfillment. So this is where if you're in the hospital, you've had a hip replaced and on your way out of the hospital, right now the hospital sort of gives you a shopping list and says, okay, go to your local pharmacy and buy all this stuff. You're going to need it for the next few months. They would prefer to instead just sort of take that order directly and fulfill it directly to the customer, deliver it to the patient's home. But that involves, again, placing orders with suppliers, drawing directly from hospital inventory, drawing from a DC and putting that altogether for the patient. So that is another potential area that we're just exploring. It'll be interesting to see how that one develops. But there's -- we've already had a number of queries from our hospital clients around this.
Our next question comes from the line of Blair Abernethy with Industrial Alliance Securities.
Peter, just on the OrderDynamics, what does the -- what was the headcount when you acquired them? And are you -- is that going to grow along with the lines of the rate of revenue growth of that division?
They are approximately 50 people right now. And my belief is their headcount will grow considerably slower than their top line revenue growth, but it will continue to grow. They are -- I mean, they've got some areas in -- I mean, in R&D, for instance, they have additional work they got to get done with. They'll need to expand the R&D team a little bit. They need to expand the sales team based on some of the opportunities they see, but they also have -- they have a very significant partner network. I mean, as compared to our -- as opposed -- frankly, as opposed to our lack of success in building out a good partner ecosystem, they've done a great job in building out a partner ecosystem. So that also really helps them to be able to grow the business with less headcount growth, both in the area of sales as well as in the area of professional services because their -- they've got some great integration partners that are doing a lot of the heavy lifting for them on integration.
Okay, great. And their revenue right now or sort of the revenue over the next year or so, is it -- what's the mix of recurring revenue versus professional services or installation type revenue?
Yes. So -- this is Mark. Blair, their P&L is about 60% recurring, 40% services currently. And we expect -- obviously, we expect that to shift pretty quickly in the periods ahead towards recurring.
Okay, great. And then last question on OrderDynamics would be around retention/earnouts. Can you just give us some color as to what you set up there? And does this business have to run as a separate subsidiary or are you integrating it across-the-board? What sort of -- what's -- how's that going to play out over the next year or so?
Sure. We're integrating the financials. But beyond integrating the financials, right now we're continuing to run it as a division, which is very focused on sort of the retail and consumer brand market space. In effect, it will be OrderDynamics, a division of TECSYS. We do expect over time, of course, there will be more and more integration as we move forward. But right now, they've got a lot of sort of heads down, high-speed activity going on at OrderDynamics that I did not want to mess with, frankly. So we are doing some cross pollinating. We are cross-training the sales teams. The marketing group is doing a lot of good work together. We'll be doing a good joint launch, launching the joint platform at the NRF show in New York in January. So a lot of good stuff going on, but it will continue to be its own unit, at least at this point in time. I mean, in terms of retention, we're obviously putting comp plans in place for the senior team and so on. That work is underway right now. But there is no earnout. The -- this was a cash on the barrelhead deal. And the -- so from here, we expect that we'll sort of use the same type of approach we used with our existing management team.
Got it. That's great. And just my last question is overall on the professional services side, I missed part of what you said, but -- so the termination of the contract, was the gross margin on that 100%? And also was -- is this customer still a customer of TECSYS? Or is it a project that they had and they decided against it? What happened that brought that about?
Yes. It was a long-term multiyear contract that had annual recurring revenue against it, but with it came guarantees of future deliveries of services and so on. And at one point, they just decided to -- they actually made the change with all their vendors. It was us, they had a number of other significant IT vendors. They changed across-the-board and just terminated all those contracts, decided they'd much rather go to sort of pay-as-they-play approach. And what it -- net effect it had for us is it meant that there was no longer any future obligations associated with that contract. As a result, all of the deferred revenue instantly had to be recognized. So in essence, yes, you end up with a chunk of revenue that comes in with 0 cost against it. So it feels great in the quarter, sucks when you get to the comparables. The -- in terms of the client, yes, they are still a client. They've had some financial struggles in the last couple of years, and so our relationship is somewhat smaller than it was. But they are still a client, and we look forward to them getting back to good financial health and hopefully becoming a more major client again.
[Operator Instructions] Our next question comes from the line of Amr Ezzat with Echelon Partners.
I just want to follow-up on the OpEx, I guess, commentary. Can you give us the company headcount ex OrderDynamics? Then, how many more bodies you're looking to add ahead what will be a -- seems to be, I guess, like a very busy fiscal Q4?
Yes. We're currently -- Amr, we're currently at about 370 without OrderDynamics, so obviously, now about 420 with. And looking ahead, I mean, we will continue to add a few heads in R&D. We had planned to add a number of heads in sales. But given the lag we've had or the extended effort it's taken to get our expanded sales leadership in place, I'm not sure, frankly, you're going to see much addition to the sales headcount this fiscal. We're already effectively in December here. If we manage to get new sales leadership in place by -- even end of January at this point, we'd be doing well. So you might start to see some ramp-up in the fourth quarter, but I have a hunch, the real expansion in sales headcount will be towards the start of next fiscal, I would think.
Then how much revenues, I guess, like, can you drive with the current headcounts? Like, can you speak to us to the utilization maybe?
Well, I mean -- if you look at the professional services group, I mean, I think the professional services group could probably drive at least another $1 million with existing headcount before they need to expand that team. Now should they wait until they fully expanded to that point before they add the headcount, no, probably not, because then they'll -- they won't be able to keep up with the demands coming from the backlog. So they will have to continue to add. But again, I don't think you're going to see anything exceptional there. They'll be sort of ramping that up slowly during Q3, Q4, but it's nothing -- I'd say, nothing exceptional, and I think there's about $1 million of extra capacity in that team right now.
Understood. On OrderDynamics, I'm trying to get a sense of -- I'm not sure if you could quantify it, but how many projects your sales guys couldn't really bid on because you didn't have a DOM system? Was it like a big pain point for them? Or -- and what has been the reaction, I guess -- I know it's early days, but the reaction of your sales team?
Yes. I mean, the sales team is pretty happy to have this hole closed. I mean, I think, in terms of number of opportunities, that's -- there's probably -- I mean, off the top of my head, we looked at those numbers a little bit ago. And I recall, there's about a dozen in the last year that sort of we would have been in a very good position to win, but without DOM we couldn't. I think what intrigues me more though is the size of them. Like typically, these opportunities in the 3PL business and in the complex distribution around brand management, the ones who need -- truly need a good DOM engine, they're the big ones. So there's some pretty sizable business out there that's associated with the complete end-to-end supply chain platform that includes DOM. And so we think it puts us in a good -- pretty good position in that market.
So is the -- I guess, now that you've solved that solution, is the pain point now not having like feet on the grounds in Europe?
Yes. I mean, that's our -- I mean, from here, if you're talking acquisitions, certainly, our next area of focus is to expand our geographic coverage. And we're -- Mark's dropped into place and Berty is back full-time on M&A, and that's his mandate is to help us solve that problem.
And is that like a case of like wait and integrate OrderDynamics more? Or do you feel that you guys have enough bandwidth, I guess, to execute on an acquisition in Europe?
No. I think we have enough bandwidth. I know -- like Mark seems to be taking Sundays off each week, I've noticed, so there's still some extra room there. But no, in all seriousness, I think we've got a pretty experienced team here that Mark's taken over from Berty. And we're busily integrating OrderDynamics at this point, but I think we'll be through sort of a lot of the heavy lifting on that within a couple of months. And in the meantime, Berty's mandate is to try to line up the next one. As you've seen with us in the past, I mean, we're pretty picky around acquisition. So the timing on the next one is -- it can be unpredictable, but we're certainly not holding up the next acquisition due to OrderDynamics.
Understood. Then as I understand it, you don't have any existing complex distribution clients, who are using the DOM -- OrderDynamics' DOM?
We actually have one. We have one account that's an overlap, and I won't mention the name, but we have one overlapping account between the 2 platforms right now.
So the APIs are all integrated and these guys are using -- like is it in the same geography and everything or is it just like the same accounts but...
Yes. No, no. It's the same geography.
Awesome. Then how hard would it be for you guys to displace another DOM system that is used by any of your complex distribution clients? Or is the real opportunity targeting new accounts because it's going to be very hard to displace, I guess, an existing integrated system?
Yes, I wouldn't anticipate displacing an existing integrated DOM. I mean, part of it is, DOM is still new that by and large, people are not replacing DOMs they've already put in place. I mean, it's just too recent, right? So this is mainly, sort of, almost greenfield type opportunities, where you have people that are running without a DOM right now, and they are starting to go nuts because their order volume is rising so fast. And often, of course, it's not that their revenue is rising, it's that their order volume is rising as their revenue is shifting from, sort of, shipping truckloads to retailers, to instead shipping individual packages to consumers. So they're coping manually and using everything from Excel spreadsheets to whatever to manage it. But as the volume starts to go higher and higher, they need a solution like this. So it's largely new DOM situations that are creating new DOM opportunities.
Great. Then maybe one last one on the pharmacy solution. Very surprised to see that second order come about so quickly. Was that new clients monitoring the progress in the go live at University of Washington? Or how has that come about, I guess?
Yes, it was actually a base account that -- but they were much more monitoring what was going on out there at the University of Washington. So they knew they wanted to tackle it. They believe there's huge opportunity in their network to drive savings around this and improvements, but they were very much staying in touch with what was going on out at UW.
I'm showing no further questions at this time.
Great. Well, thank you, everyone. Thanks for taking the time to join us today. And as always, if you have any additional questions, please don't hesitate to give us a call. And we look forward to speaking to you in late February when we announce our third quarter results. Thanks. Bye for now.
Thank you, ladies and gentlemen. That does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your line.