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Tecsys Inc
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Good
morning,
everyone.
Welcome
to
the
Tecsys
Third
Quarter
Fiscal
2022
Results
Conference
Call.
Please
note
that
the
complete
third
quarter
report,
including
the
MD&A
financial
statements
were
filed
on
SEDAR
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.
I
would
like
to
remind
everyone
that
this
call
is
being
recorded
on
Thursday,
March
3,
2022, 8:30
AM
Eastern
Time.
I
would
now
like
to
turn
the
conference
over
to
Mr.
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.
In
the
third
quarter,
we
delivered
excellent
results
fueled
by
strong
demand
for
our
solutions
and
the
continued
success
of
our
transformation.
Our
customers
are
not
only
staying
with
us,
they
are
growing
with
us
and
transforming
their
own
businesses.
In
Q3,
I'm
thrilled
to
say
that
we
continued
to
deliver
another
great
quarter
with
double-digit
ARR
growth,
solid
backlog
and
a
strong
pipeline
across
all
industries.
We
continue
to
solidify
our
mission
of
equipping
our
customers
with
supply
chain
excellence.
Although
we
did
experience
some
delayed
projects
due
to
Omicron,
I'm
very
proud
of
the
work
our
team
did
by
closing
out
the
quarter
strong,
expanding
on
the
depth
and
breadths
of
our
platform,
and
as
always,
investing
in
our
people
and
culture.
Today,
I'll
start
by providing
some
additional
color
on
the
results,
and
Mark
will
walk
us
through
the
financial
results
in
more
detail.
And
finally,
I'll
share
what
I'm
looking
forward
to
this
year
and
beyond.
We'll
follow
that
up
with
a
Q&A
session.
There
are
two
key
indicators
that
I'd like
to
highlight
which,
despite
currency
headwinds,
are
contributing
to
our
track
record
of
solid
growth.
Revenue
where
I'll
touch
on
growth
and
quality,
and
our
pipeline
where
I'll
touch
on
market
conditions.
First,
it's
important
to
note
that we
have had
consistent
consecutive
growth
on
a
quarterly
basis
for
the
last
three
years.
As
we
continue
to
emphasize,
SaaS
revenue
is
scaling
up
relatively
quickly
due
to
our
ongoing
strategic
shift
to
SaaS
in
all
of
our
markets.
As
we
continue
to
mature
this
SaaS
revenue
model,
we
will
increasingly
create
greater
revenue
visibility
and
improve
the
long-term
quality
of
our
revenue.
This
leads
to
my
second
point, our
pipeline.
The
strong
revenue
performance
is
fueled
by
the
continued
strength
of
our
pipeline.
Companies
in
every
sector
are
working
diligently
to
digitize
their
supply
chain,
to
maintain
competitive
advantage,
and
we
are
there
for
them.
If
the
last
few
years
have
taught
us
anything,
it's
that
the
supply
chain
is
absolutely
critical.
Companies
are
now
taking
this
knowledge
and
bolstering
technology
to
become
nimbler
in
the
face
of
new
potential
future
uncertainties.
And
we
are
seeing
the
effect
of
that
trend
not
only
with
new
prospects,
but
the
growth
in
utilization
from
our
existing
base
of
customers.
With
that
said,
we
continue
to
invest
in
innovative
solutions
to
further
drive
benefit
to
our
customers,
and
we've
realized
the
significant
milestone
in
the
introduction
of
an
AI-driven
augmented
cluster
building
application
at
our
customer,
Werner Electric. This
application
intelligently
groups
together
picks
of
various
orders
and
simulates
multiple
pick
paths,
and
then
chooses
the
optimal
combination
to
reduce
travel
time
and
boost
the
efficiency.
We
expect
to
see
a
15%
to
20%
cost
saving
just
in
travel
distance
alone.
We
believe
this
to
be
very
timely,
as
our
customers
continue
to
be
challenged
with
labor
shortages.
As
we
mature
our
AI
strategy,
we
see
ample
opportunity
to
take
full
advantage
of
the
data
our
system
generates
to
create
customer
value.
Our
momentum
is
strong.
And
to
maintain
this,
we
realized
that
people
of
Tecsys
are
the
most
critical
asset
we
have,
and
we
are
allocating
higher
expenses
for
retention
as
well
as
recruiting
efforts
and
attracting
new
employees.
Mark
will
now
provide
further
details
on
our
financial
results
for
the
third
quarter
and
the
first
nine
months
of
our
fiscal
year.
Thanks,
Peter.
As
indicated
at
the
beginning
of
the
call,
our
financials
and
MD&A
are
available
on
SEDAR.
I'll
focus
my
summary
here
just
on
a
few
of
our
key
metrics
and
areas
where
I
will
provide
some
additional
color.
We're
pleased
with
our
strong
performance
in
our
third
quarter
ended
January
31, 2022.
Total
revenue
was
a
record
CAD 35.4
million,
11%
higher
than
CAD 31.9
million
reported
for
Q3
of
2021.
As
many
of
you
know,
a
significant
portion
of
our
revenue,
about
65%
is
denominated
in
US
dollars. And
as
a
result,
movement
in
currency
exchange
rates
has
an
impact
on
our
reported
revenue
and
growth.
During
Q3
fiscal
2022,
currency
exchange
movements
negatively
impacted
our
reported
revenue
as
the
value
of the
US
dollar
was
weaker
compared
to
the
same
quarter
last
year.
In
fact,
on
a
constant
currency
basis using fiscal
2022
currency
rates,
our
third
quarter
revenue
grew
by
about
16%
compared
to
the
same
quarter
last
year.
We
continue to
experience
strong
and
diverse
revenue
streams,
underpinned
by
a
49%
increase
in
SaaS
revenue
which
was
up
from
CAD 4.7
million
in
Q3 2021
to
CAD
7.0
million
in
Q3 2022.
On
a
constant
currency
basis,
SaaS
revenue
was
up
about
56%.
I
also
want to
note
again
that
we're
at
the
precipice
of
a
significant
milestone
in
our
transition
as
a
SaaS
business,
with
our
SaaS
revenue
currently
representing
46%
of
our
total
recurring
revenue
streams
in
Q3
fiscal
2022,
and
we
have
line
of
sight
SaaS
crossing
over
the
50%
threshold
within
a
matter
of
months.
That's
about
a
three-year
timeframe
into
our
SaaS
transition.
Our
annual
recurring
revenue
at
January
31, 2022
was
CAD
59.5
million,
up
17%
from
CAD
50.8
million
at
January
31, 2021.
On
a
constant
currency
basis,
that
increase
was
about
19%.
Professional
services
revenue
for
the
third
quarter
was
CAD 12.9
million,
up
5%
from CAD
12.3
million
reported
for
the
same
quarter
last
year.
Again,
currency
movements
created
headwind
on
revenue
growth
here,
which
would
have
been
9%
on
a
constant
currency
basis.
Moving
on
to
bookings
in
the
quarter.
SaaS
bookings
are
reported
on
an
annual
recurring
revenue
basis
and
increased
by
133%
to
CAD 2.3
million
in
Q3
2022,
compared
to
Q3 2021
which
was
at CAD
1.0
million.
SaaS
bookings
were
highlighted
by
the
addition
of
a
new
hospital
network,
as
well
as
significant
base
business
from
our
customers
across
all
verticals.
We
also
signed
another
new
hospital
network
in
the
first
days
of
Q4.
Professional
services
bookings
were
CAD 9.3
million,
down
11%,
compared
to
CAD
10.5
million
in
the
same
quarter
last
year.
We
had
some
professional
services
booking
slip
into
Q4,
about CAD
4
million
signed
in
the
first
few
weeks
of
Q4.
This
highlights
again
the
lumpiness
and
impact
of
timing
on
reported
quarterly
bookings.
We
still
like
bookings
as
a
metric
because
over
time
we
believe
it
provides
a
good
leading
indicator
of
business
performance
and
growth
prospects.
SaaS
remaining
performance
obligation,
also
known
as
RPO
or
SaaS
backlog,
was
CAD 78.5
million
at
the
end
of
Q3
fiscal
2022,
up
36%
from
CAD 57.6
million
at
the
same
time
last
year.
On
a
constant
currency
basis,
that
growth
was
37%.
SaaS
backlog
was
up
8%
sequentially
compared
to
the
second
quarter
of
fiscal
2022,
at
6%
constant
currency.
The
increase
was
driven
by
significant
multi-year
SaaS
bookings
during
the
quarter.
Professional
services
backlog
at
the
end
of
Q3
fiscal
2022
was
CAD
29.5
million,
that's
down
about
22%
compared
to
CAD 37.8
million
at
the
same
time
last
year,
and
down
from CAD
33.1
million
at
October
31, 2021.
As
noted
above,
timing,
especially
in
large
deals,
can
have
a
pretty
significant
impact
on
reported
backlog
at
any
point
in
time.
Our
professional
services
backlog
remains
robust
and
we
expect
our
delivery
team
to
continue
to
be
very
busy
in
the
quarters
ahead.
For
the
third
quarter,
total
gross
profit
was
CAD
15.2
million,
that's
down
CAD 0.2
million
compared
to
CAD
15.4
million
in
Q3
of
2021.
As
a percentage
of
revenue,
gross
margin
was
43%,
compared
to
48%
in the
same
quarter
last
year.
That
decline
was
a
result
of
unfavorable
exchange
movements,
changes
in
the
revenue
mix
and
investment
to
support
growth.
Net
profit
for
the
quarter
was
CAD 0.9
million
CAD
0.06
per
fully
diluted
share,
compared
to
CAD 1.8
million
in
Q3
last
year
which
was
CAD
0.12
per
fully
diluted
share.
Adjusted
EBITDA
was
CAD
2.7
million
in
Q3 2022,
compared
to
CAD
4.0
million
in
Q3 2021.
The
decrease
in
profit
and
adjusted
EBITDA
compared
to
the
third
quarter
last
year
was
primarily
due
to
an
unfavorable
foreign
exchange
impact
of
approximately
CAD 1.6
million.
Turning
now
very
briefly
to
our
results
for
the
first
nine
months
of
our
fiscal
2022.
Our
total
revenue
was
CAD 102.9
million,
up
13%
compared
to
CAD
90.7
million
in
the
same
period
last
year
and that's
up
19%
on
a
constant
currency
basis.
SaaS
revenue
for
the
first
nine
months
of
fiscal
2022
was
CAD
19.2
million,
up
41%
from CAD
13.7
million
in
the
same
period
last
year
and that's
up
49%
on
a
constant
currency
basis.
Our
SaaS
bookings
were
up
23%
compared
to
the
first
nine
months
of
last
fiscal
year.
Our
profit
for
the
first
nine
months
of
fiscal
2022
was
CAD 1.9
million
or
CAD
0.13
per
fully
diluted
share,
compared
to
CAD
5.2
million
or CAD
0.35
per
fully
diluted
share
in
the
period
last
year.
Adjusted
EBITDA
was
CAD 8.4
million
in
the
first
nine
months
of
the
current
fiscal
year,
compared
to
CAD 12.3
million
for
the
same
period
last
year.
Foreign
exchange
movements
had
a
negative
impact
of
approximately
CAD 4.6
million
on
profit
and
adjusted
EBITDA
in
the
current
nine-month
period
compared
to
the
same
period
last
year.
We
ended
the
third
quarter
with
strong
balance
sheet
position.
At
January
31, 2022,
we
had
cash
and
cash
equivalents
and
short-term
investments
of
CAD 36.9
million,
compared
to CAD
45.9
million
at
year-end.
And
we
had
debt
of
CAD
8.7
million,
compared
to
CAD
9.6
million at
year-end.
Cash
provided
by
operations
was
CAD
0.9
million
in
Q3,
and
our
DSOs
or
days
sales
outstanding
and
accounts
receivable
remain
reasonable
at
58
versus
47
at year-end,
and
45
at
the
same
time
last
year.
Recall
that
our
Q4,
so
that's
next
quarter
for
us,
tends
to
be
a
high
point
for
cash
from
operations
due
to
some
seasonality
in
our
non-cash
working
capital,
in
particular
related
to
annual
tax
credit
refunds.
I'll
now
turn
the
call
back
over
to
Peter
to
provide
some
outlook
comments.
Thanks,
Mark.
The
positive
growth
trends
are
continuing
for
Tecsys
as
we
move
through
fiscal
2022.
Our
consistent,
strong
financial
performance,
new
accounts
and
the
expansion
of
our
existing
accounts,
and
most
notably
our
solid
pipeline
are
continuing.
The
market
conditions
give
us
confidence
that
we
are
well positioned
to
continue
capitalizing
on
this
opportunity.
As
mentioned
earlier,
we
are
laser
focused
on
retaining
the
great
people
we
have
while
attracting
new
talent
to
stay
ahead
of
this
changing
market.
We
continue
to
see
demand
for
adding
additional
talent,
and
we
are
starting
to
see
what
appears
to
be
some
potential
positive
signs
in
the
labor
market
after
what
has
been
a
fairly
choppy
past
number
of
months.
We
are
mindful
of
our
delivery
capacity
and
we
continue
to
invest
on
that
front.
We
are
also
continuing
to
invest
in
our
channel
relationships.
In
both
cases,
we're
taking
proactive
steps
to
manage
for
continued
growth.
While
we're
optimistic
that
the
worst
of
the
pandemic
is
behind
us,
it
has
taught
all
of
us
to
be
prepared
for
the
unknown
and
to
be
adaptable
to
overcome
– adaptable
enough
to
overcome
curveballs.
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
investors
about
our
three
key
operational
themes
for
the
remainder
of
fiscal
2022,
which
have
not
changed
from
our
previous
analyst
call
as
we
enter
the
fiscal
year.
First,
we'll
continue
to maintain
focus
on
developing
and
growing
our
SaaS
revenue
model.
We
will
likewise
continue
to
optimize
our
internal
processes
and
resources
to
complement
this
shift
to
SaaS to
maintain
high
levels
of
customer
satisfaction.
Secondly,
we'll
continue
to
expand
our
partnership
ecosystem.
This
is
key
for
us
to
scale
rapidly
into
the
market
opportunities
that
I
mentioned
earlier.
We
now
have
partners
working
effectively
with
us
in
both
North
America
and
Europe.
We'll
continue
to
invest,
so
that
we
can
enable
them
more
quickly.
From
accelerated
training
programs
to
improved
onboarding
tools,
we
are
determined
to
continue
to
make
our
SI
partners
more
and
more
successful.
Thirdly,
we
plan
on
investing
in
all
of
our
sales
channels
to
exploit
the
momentum
in
the
opportunities
coming
at
us.
We
also
continue
to
expand
and
refine
our
omni-channel
business
platforms
to
service
evolving
needs
in
our
healthcare
supply
chain,
converging
distribution
and
retail
market
segments.
These
efforts
will
help
us
to
not
only
minimize
customer
churn,
which
is
already
very
low,
but
will
also
help
us
to
expand
revenue
from
current
clients,
as
we
saw
happening
again
this
quarter.
With
that,
we'll
open
up
the
call
for
questions.
Thank
you.
Thank
you.
[Operator Instructions]
Our
first
question
comes
from
the
line
of
Gavin
Fairweather
of
Cormark.
Please
go
ahead
with
your
question.
Well, hi,
good
morning.
I
thought
we
could
start
out
on
the
healthcare
side.
And I
think
last
quarter
you
referenced
kind
of
the
next
20
[indiscernible]
(16:17)
roughly
identified
and
deals
[indiscernible]
(16:20)
being
worked
in
the
pipeline.
I
know
those
deals
can
be
kind
of
unpredictable
on
how
they
move
[indiscernible]
(16:26)
any
color
on
how
those
deals are
maturing
and
moving
into
the
[ph]
pipeline
(16:31)?
Sure.
Overall,
Gavin,
that –
like,
overall,
the
healthcare
market
is
almost
on
fire
these
days.
We
are
seeing
a
lot
of
activity
in
that
segment.
We're
seeing
a
lot
of
deals
moving
through
the
pipeline.
It's
interesting.
I
feel
like
the
biggest
change
in
a
way
in
the
last
year
is
we've
moved
from
sort
of
management
teams
trying
to
convince
the
board
that
they
need
to
do
this
and
invest
in
their
supply
chain
technology
to
now
the
shoes
on
the
other
foot,
the
boards
are
asking
the
management
teams
sort
of
what
they're
doing
about
supply
chain
and
how
soon
they're
going
to
get
a
good
platform
in
place.
So,
it's
turned
around
and
accelerated.
This
quarter
was
weird
from
the
standpoint
that
– especially
for
healthcare,
to
some
extent
across
all
segments,
but
especially
for
healthcare.
This
quarter
was
really
only
probably
a
little
less
than
two
months'
long.
The
Omicron
wave
came
through
and
it
hit
different
areas
of
the
country
at
different
–
slightly
different
times.
But
basically,
the
bulk
of
our
clientele
in
healthcare
were
massively
distracted
for
anywhere
between
one-third
and
half of
the
quarter. So,
we
felt
like
it
was
–
it
felt
like
a
very
short
quarter
from
the
standpoint
of
actually
getting
deals
done.
But
the –
and
you
saw
that
in
some
of
the
deal
slippage
that
Mark
referred
to,
I
mean,
the
professional
services
bookings,
big
chunk
that
signed
in
just
in
the
first
week
of
February.
That
normally
would
have
been
Q3
stuff.
And
even
the
additional
network
that
signed
in
the
first
week
of
February
that
would
– that
normally
would
have
been
Q3
stuff,
but
it
was
all
just
sort
of
Omicron shortening
up
the
quarter.
But
overall,
to
answer
your
question,
the
activity
in
that
market
is
stronger
than
we've
ever
seen
it.
That's
very
helpful.
And then, maybe
I
thought
we
could
zero
in
on
the
services
side.
And
I
know
it's
kind
of
the
holiday
quarter
and
I
think
you
referenced
Omicron
impacting
some
projects. Do
you
have
a
sense
of
the
amount
of
billings
that
maybe
slipped
from
your
third
quarter
into
future
quarters
and
should
we
expect
a
catch-up
there?
Yeah.
We
actually
expect
a
bit
of
a
catch-up.
It's
hard
to
quantify
exactly
how
much
slipped.
I
mean,
if
I
were
to
put
a
number
on
it,
I
would
say, it
was
at
least CAD
1.5
million
or
something
like
that.
We
just
had
too
many
projects
where
we
suddenly
got
to
mid-December
or
whatever,
and
they
– customer
calls
and
says, you know what,
we're
in
the
middle
of
Omicron
wave,
half
our
staff
is
sick.
Everybody
go
home
and
we'll
see
in
a
month
kind
of
thing.
So,
we
just
had
a
lot
of
that.
Now,
the
challenge,
of
course,
is
while
we
do
expect
some
catch-up
in
Q4,
to
some
extent
we
can
only
catch
up
so
much
because,
of
course,
we're
capacity
constrained.
So,
we've
added
head
count
in
that
– on
our
professional
services
side.
But
the
supply
is
not
infinite
there.
So,
we
certainly
expect
a
strong
Q4
in
pro
services.
As
you
know,
as
it
largely
seems
like
the
–
seems
like
whatever
the
vaccinations
didn't
get,
Omicron
got
to
it.
It
seems
like
we're
kind
of
out of
the
woods
on
this
now,
but I
would
guess,
Mark,
I
don't know
if
you
would
agree,
I
feel
like
maybe
CAD 1
million,
maybe
CAD
1.5
million,
it's
somewhere
in
that
range.
Yes,
I
think
that's
reasonable.
That's
great.
And
then,
maybe
I
thought
we
could
just
chat
on
the
labs
module
which
commercialize,
I
guess,
in
January.
We
haven't
talked
about
it
a
ton
in
the
past.
Can
you
maybe
just
walk
us
through how
you
think
about the
stock
market
size,
the
distribution
for
that
module
and
overall just
your
thoughts
on
growth
for
[indiscernible]
(20:17)?
You
know
what,
sorry, Gavin,
I
didn't
pick
up
which
module
you're
referring
to.
The
labs
module,
the
clinical
labs
module. Sorry.
Oh, okay.
Sure.
Yeah, I
mean
that –
that's
still
very
early
stage.
I
don't –
I
mean,
I
would
say
you're
probably
not
going
to
hear
much
from
us
about
labs
for
– in
any
significant
commercial
way
for
probably
another
year
or
two.
I
mean,
our
focus
is
– at
this
point,
is
more
getting
– continuing
to
gain
traction
in the
pharmaceutical
module
for
in-hospital
pharmacy.
In
fact,
our
goal,
if
you
look
at
what
we're trying
to
get
done,
we're
saying,
we
want to
try
and
get
to 100
IDNs
within
the
next
few
years.
And
we
want to
make
sure
that
at
least
10 of
those
IDNs
are
deploying
our
pharmacy
module.
Because
our
feeling
is
that
if
we
can
get
at
least
10 of
them
deployed
using
our
pharmacy
module,
that
will
sort
of
set
us
up
for
a
second
wave
to
go
back
through
the
entire
customer
base
and
adding
the
pharmacy
module.
So,
that's
our
goal.
I
mean,
this
market
is –
as
you
know,
is
a
pretty
cautious
market.
So,
it's
really,
I
would
say,
the
pharmacy
module,
it's
taking
up
the
bulk
of our
expansion
in
terms
of
trying
to
get
some
real
traction
there.
Got
it.
And
then
lastly,
before
I
pass
the
line,
I
know
you've
been
doing
some work
kind
of
internally
to
optimize
your
software
for
running
on
a
staff
delivery
consultant.
Can
you
just
provide
a
bit
of
an
update
on
that
dev
project
in
terms
of
timelines
and
maybe
just
touch
on
[indiscernible]
(21:58)?
Sure. I
mean,
there's
the –
from
the standpoint
of
project
to
make
our –
take
our
software
to
be
sort
of
much
more
SaaS
native,
that
work
continues.
And
there's
a
way
in
which
you're
always
wrestling
with
technical
debt,
right.
I
mean,
it's
just
the
nature
of
the
software
development
space.
It
sometimes
drives
me
nuts.
[indiscernible]
(22:26)
product
that
I
still
think
of
is
brand
new.
We
develop
the
product
within
the
last
three
years
and
I
start
hearing
from
R&D
that
there's
some
technical
debt
that
they
have
to
go
back
and
work
through.
And
it's
just –
it's
the
nature
of
the
rapidly
evolving
sort of
cloud
space
that
some
of
this
stuff
changes
all
the time.
But
it
certainly
looks
to
us
as
though
the
heavy
lifting
will
be
done
pretty
much
by
the
end
of
this
calendar
year.
I
mean,
we're
–
we've
introduced
all
kinds
of
new
security
capability.
We're
shifting
the
underlying
database
to
run
off
a
much
lower
cost
database,
so
that
we
will
be
able
to
support
the
[indiscernible]
(23:06)
database
in
AWS.
So –
and
we're –
we've
added
all
kinds
of
scalability
capability.
We've
got
a
very
large
go-live
that
happened
in
January
over
a
thousand
users
at
a
single
site
and
it's
performing
very,
very
well
in
the
cloud.
So,
we're
pretty
happy
with
where
we're
at
on
that.
And
we –
as
I
say,
we
think
the
heavy-lifting
will
kind of
be
done
by
the
end
of this
calendar
year.
From
the
standpoint of
impact
on
margins,
the
shift
in
database
will,
over
the
next
year,
we
think
got
somewhere
around
3 percentage
points
to
5
percentage
points
of
margin
to
the
SaaS –
to
our
SaaS
numbers.
But
really
only
on
new
accounts.
It'll
take
more
time
to
move
existing
accounts
over
on
to
that.
So
– but
still
that – and
we
believe
that
will
start
to
show
up
significantly
by
the
end
of
our
next
fiscal
year.
The
other
margin
shift
that
I
think
you're going
to
see
in
the
coming
couple of
years
is
we've
probably
only
got
another
maybe
six
months,
probably
a
couple
of quarters.
I'm
going
to
ask
Mark
to
comment
on
this
when
I'm
done.
But
another
couple
of
quarters
of
continuing
to
build
out
the
bench
on
our
cloud
and
DevOps
support
team.
So,
that's
what
keeps
suppressing
the
margins
at
this
point.
It's
even
though
the
revenue
is
growing
pretty
significantly,
up
more
than
50%
this
quarter
constant
currency,
we're
continuing
to
build
out
that
bench
and
get
a
deeper
and
deeper
bench
of
expertise
and
capability
to
operate
the
– operating
24/7.
We're
a
couple
of quarters
away
from
having
that
pretty
much
done.
So,
at
that
point,
the
cost
starts
to
flatten
out
and
the
revenue
just
continues
to
rise.
So,
Mark
does
that...
Yeah,
I
think
that's right.
[indiscernible]
(24:56) what you're seeing?
...in
the
next.
I
think
that's
right.
We've
got
this
quarter
and
probably
the
first
half
of
next
year
to
get
to
that
place.
And
the
other
thing
that's
going
on
in
there
is
investment
in
security
that'll
be
going
on
over
that
time
period
as
well,
of
course,
where
we're
faced with
some
pretty
difficult
hiring
environment
too,
but
–
so
timing
may
be
impacted
by
that,
but
I
think
that's
right.
Our
plan
is
to
bring
in
those
resources
and
have
the
skill
created
by
the
first half
of
next
fiscal.
Got
it.
That's
super
helpful.
Thanks so
much.
Great,
thanks.
Thank
you.
Our
next
question
comes
from
the
line
of
Amr
Ezzat
of
Echelon
Partners.
Please
go
ahead
with
your
question.
Hi,
it's
Amr.
Peter,
Mark, good
morning
and
thanks
for
taking
my
questions.
My
first
one
is
on
heart...
Hi,
Amr.
Hi.
So,
my
first
one
is
on
your
capital
deployment
strategy.
The
stocks
come
off
quite
a
bit since
December
despite,
I
think, a
12
quarters
of, like,
record
revenues
now.
You've
got
a
decent
cash
position
under
levered
balance
sheet.
So,
like,
I'm
wondering
what
was
the
board
thinking
on
buybacks
versus
maybe
increasing
the
dividend
and
M&A.
Can
you
share
some
thoughts
there?
Yeah.
I
mean,
I
think,
Amr,
I
mean,
the
focus
of
the
board
and
our
management
team
is
basically
hang
on
to
the
war
chest
and
look
for
the
right
acquisition.
I
mean,
we
continue
to
generate
enough
cash
to
continue
to
slowly
add
to
our
cash
pile
as
well
as
pay
the
dividends.
But
our
–
the
– a
lot
of
that
money
was
actually
raised
at
CAD
17
a
share.
So,
even
though
the
stock's
come
down
from –
in
the
60s,
I
mean,
it's
obviously
come
down
along
with
everyone
else.
Misery
loves
company,
so
I
try
to
make
myself
feel
better
by
looking
at
other
people's
stock.
But
it
–
we
feel
like
the
opportunities
for
acquisitions
are
getting
a
little
bit
better.
The
private
equity
market
has
not
cool
off
to
the
same
extent
that
the
public
markets
have.
But
there's
still
sort
of
a
little
bit
more
realism
creeping
into
that
side
as
well.
So,
even
though
our
stock
is
down,
we
think
there
may
be
some
potential
opportunities
on
the
horizon.
So,
it's
really
–
I
know
we've
sort
of
sat
on
that
cash
for
quite
a
while,
but
it's –
we
do
feel
like
it
needs
to
be
there
to
be
ready
to
deploy
for
the
right
acquisition.
Okay.
Now,
that's
good
color.
And
just
a
follow-up
on
Gavin's
question, like,
Peter,
you
mentioned
during
COVID,
there
was
obviously
an increased
openness
and
urgency
to
have
conversations
on
supply
chain
management
software
and
investing
in the
supply
chain.
And
I'm
wondering
with
the
COVID
pressures
easing,
do
you
feel
these
conversations
with
new potential
clients
are
still
very
constructive,
or
is
the
strong
level
of
activity
we
are
currently
seeing
coming
from
conversations
initiated
like
in
the
past
few
quarters
are
behind
of COVID?
Yeah.
I mean, the – I mean,
think
you're
sort
of
asking
sort
of
is
the
urgency
accelerating
or
decelerating.
I
mean,
it
seems
to
us
that
sort
of
a
whole
generation
of
business
leaders
has
just
learned
all
about
how
important
supply
chain
is
and
that
in
fact,
your
business
can
almost
fall
apart
if
you don't
know
where
your
stuff
is
or
when
it's
coming
in
and
have
the
ability
to
manage
it
real
time
and
react
in
real
time
and
so
on.
So,
we're
seeing –
I
mean,
if
we
just
look
at
our
pipeline,
like,
our
pipeline
is
up
massively
compared
to
this
time
last
year.
And
this
time
last
year,
we
were
already
a
year
into
pandemic.
So,
it
doesn't
seem
to
be
slowing
down.
It
seems
to
be
of
anything
accelerating.
Healthcare
is
moving
the
fastest
rate
now
in
that
they
seem
to
have already
sort
of
said,
okay,
you know what, we
can't
wait
for
the
pandemic
to
end.
We
just
got
to get
this
stuff
moving.
So,
there
we're
seeing
actual
deals
signed
and
so
on.
In
public
distribution
and
retail,
we're
starting
to
see
more
deals
moving
toward
a
close.
But
a
lot
of
the
activity
is
still
top
of
funnel
there,
where
it's
companies
that
have
realized
that
their
existing
platforms
are
not
capable
of
dealing
with
what
they
now
have
to
handle.
But
at
the
same
time,
they're
looking
at
the –
all
the
distractions
going
on
in
their
business,
not
only
directly
COVID,
but
there's
completely
screwed
up
supply
chains
they're
trying
to
manage
as
we
get
through
these
next
number
of
months.
I
mean,
they
can't
access
containers,
cost
of
containers
has
tripled
or
quadrupled.
In
some
cases,
their
landed
cost –
because
of
the
cost
of
moving
container
across
the
water,
their
landed
cost
is
higher
than
the
retail
selling
price.
So,
there's
all
kinds
of
issues
there
they're
dealing
with.
So,
it's
not
the
time
for
some
of
them
to
also
swap
out
their
core
operating
platform,
but
they're
trying
to
get
ready
to
swap
out
their
core
operating
platform
because
I
can
see
it's
not
handling
sort
of
the
new
world
we're
in.
So,
we're
anticipating
–
I
mean,
crystal
ball
gazing
is
already
always
dangerous.
But
if
judging
by
our
pipeline,
we're
expecting
sort
of
healthcare
to
be
in
the
lead
for
another
couple
of
quarters
and
then a
pretty
rapid
acceleration
on
the
complex
distribution
and retail
side.
Okay.
That's
all
great
color.
On
professional
services,
I
mean,
three
quarters
running
at
new
record
levels.
I
mean,
you
mentioned
your
capacity
constraint.
Can
you
maybe
give
us
or
remind
us
of
your
head
count
in
professional
services
and
how
many
– how
much
staff
are
you
adding?
Let
me
pass
that
one
over
to
Mark. We've
got
a
lot
of
open
positions,
that's
for
sure.
But
it's
an
interesting
thing
that
after,
I
think,
the
first
eight
months
of
the
year,
our
fiscal
May
to
December,
we
really
struggled
to
add
heads.
We
added
some, so
we had some
waves of
resignations
come
through.
And
so, then
a
lot
of people
were
restless
and
moving
around
and
so
on.
And
suddenly,
in
January
and
February,
that
seems
to have
turned.
And
even
as
we're
heading
into
March,
it
seems
to
be
remaining
very
positive.
So,
suddenly
we're
able
to
recruit,
retain
and
really
build
up
those
teams.
So,
we
don't know
if
the
wave
of
restlessness
is
kind
of
just
subsided
or
did
we
get
smarter,
I
don't
think
it's
really
that.
We
did
adapt
some
of
our
strategies,
but
somehow
something
shifted
in
the
market.
And
we're
finding
it's
suddenly
easier
again
to
add
talent.
But
I'll
let
Mark
give
you
some
of
the
numbers
there.
Yeah.
So,
Amr,
we're at
about
240, 245
professional
services
team
size
right
now.
And
that
would
be
up
about 20
heads
from
the
beginning
of
the
year.
As
Peter
mentioned,
we
had
our
quarter
one
and
our
quarter two
were
kind
of
bumpy.
We
had
some –
we
did
have
some
attrition.
We
had
people
leaving.
We
were
hiring,
but
our
head
count
growth
was
kind
of
slow
in
the
first
couple of
quarters.
It
almost
feels
like
kind
of
since –
even
since
the
first
of
the
year
that
we've
done
some
things,
we've
reacted to
that,
we've
looked
at
comp,
we've
become
as
competitive
as
we
think
we
need
to
be
to
retain
and
hire
the
right
people.
And
it
feels
like
the
winds
of
change
have
stopped
blowing
there
a
little
bit.
And
at
least
in
the
last
couple
of
months,
we've
seen
what
seems
like
a
more
stable
recruiting
environment
for
us
and
a
more
stable
retention
environment,
so
that
our
head
count
growth
in
the
last
couple
of months
has
been
out
of
pace
with
what
we
saw
in
the
first
sort
of
eight
months
of
our
fiscal.
So,
reason
to
– reason
for
some
positive
outlook
on
our
ability
to
scale
up
that
business
a little
bit
more
rapidly
in
the
coming
quarters.
And
where
do you
want
to
take
that
245
number
in
the
next
couple
of quarters?
Yeah,
we
would
increase
that
by
another 30
heads
in
a
heartbeat.
And
then,
up
from
there.
Great.
And then,
maybe
one
last
one.
I
mean,
you
guys
touched
on
margin
and
a
couple
of
moving
parts
over
the
next
few
quarters.
OpEx
is
flat
from
last
quarter
which
surprises
me.
Wondering
how
we
should
be
thinking
about
your
investments
in
the
business
going
forward,
as
well
as,
like,
you
guys
spoke
to
inflationary
pressures,
specifically
on
the
next
couple
of quarters,
what's
a
good
sort
of
number
to
use?
Yeah,
we
think we
are
going to
continue
that
investment
that you've
seen.
I
know
it
didn't
change
a
lot
in
the
last
quarter.
But
it
has
been
inching
up
quarterly
across
the
year.
And
as
we
look
ahead
and
think
about
what
we're
doing
and
think
about
investing
in
the
product
and
investing
in
the
sales
and
marketing
team
and
programs,
we
expect
that
part
of
the
OpEx
to,
to
continue
to
tick
up
like
you
saw
in earlier
quarters.
Great.
I'll
pass
the
line
and
congrats
on
a
strong
quarter.
Thanks,
Amr.
Thank
you.
Our
next
question
comes
from
the
line
of
Nick
Agostino
of
Laurentian
Bank
Securities.
Please
go
ahead
with
your
question.
Hi.
Yes.
Good
morning.
I
guess
first
question, just
to make
sure
I
heard
correctly,
Peter,
did
you
say
that...
Yeah?
Sorry,
yeah. Did you say that...
I
think,
Nick...
Sorry,
can
you
guys
hear
me?
Yes,
we
can. Yeah.
Kind of breaking
up
a
bit,
Nick.
I'll
try
to
speak
closer
to
the
mic.
I
just
want
to confirm
it
was
one
IDN
win
in
the
quarter,
and
then
one
follow-on
IDN
win
after
the
quarter.
That's
right.
That's
right, Nick.
Yeah,
we
had
thought
there
was going
to
be
two.
But
at
the
last
minute,
there
was
again
some
distraction
in
one
of
the
IDNs we're
about
to sign
and
it
slipped
into
the
first
week
of
February.
So,
there
was
one
truly
in
the
quarter
and
one
just
outside
the
quarter.
Okay.
Great.
And
then,
on
the
commentary you
guys
made
earlier
in
the
press
release
with
regards
to
Omicron
impacting
December
and
January,
you've
given
the
color
on
the
healthcare
side,
was
there
any
– were
you
observing
the
same
impact
on
the
other
segments
of
the
business?
Or
was
that
commentary
totally
skewed
just to
healthcare?
No,
it
was
right
across
the
board.
Like,
when
account,
for
instance,
in
the
sort
of
Detroit
region
where
I
mean,
there
was
a
full
six
weeks
in
the
quarter
where
they
were
just,
I
mean,
they
could
barely
keep
the
lights
on
and
so
many
people
out with
Omicron.
So,
that
whole
projects slowed
down
massively.
So, it
was
pretty
well
right
across
the
board.
I'm
not
sure
anybody
was
spared.
I
mean,
the
further
– further
south
you
went
in
the
US,
the
less
the
impact
was.
There's
no
question.
But
–
but
still
I
don't
think
there
was
a
single
sector
that
was
spared.
Our
retail
clients
were
the
least
affected.
But
of
course,
retail
is
still a
pretty
small
segment
for
us.
Okay.
That's
good
color.
And
then,
going
back
to
the
commentary
you
provided.
You
said
the
focus
is
on
the
pharma
module
getting
traction
there.
First,
just
to make
sure
I heard
correctly.
You
said
you
hope
10
of
the
next
100
IDN
wins
include
pharma
module
or
was
it
10
of
when
you
get
to
100 IDNs
that
you
hope
that
initial
100 includes
those
10
or
includes
10?
Yeah.
It's
when
we
get
to
100,
we're
currently
sort
of
just
blowing
past
50
kind
of
now.
So,
if
–
we're
hoping
that
by
the
time
we
get
to
100,
we'll
have,
at
least
10%
of
them
will
be
running
the
pharmacy
module
because
we're
really
seeing
– I
mean,
we
look
at
this
overall
market
and
we
said,
okay, there's
311
IDNs
we're
directly
targeting.
So,
call
it
a
CAD 620
million
ARR
market.
As
we
look
out
over
the
long
haul,
we're
kind
of
saying,
it's
probably
not
reasonable
to
expect that
we'll
win
more
than
half
of
the
market.
So,
it
feels
like
the
market
ceiling
is
maybe
around
150 IDNs
kind
of
thing.
So,
we
want
to make
sure
that
as
we
sort of
get
through
that
effort
to
take
a
big
chunk
of
that
market
for
the
rest
of
the
supply
chain
requirements
that
we've
got
a
second
wave
to
go
– to
ready
to
roll
as
this
wave
starts
to
sort
of
wind
down,
whatever
that
would
be,
five
or six
years
from
now
kind
of
thing.
So,
we're
saying,
let's
make
sure
that
we
don't lose
sight
of the
fact that
we
want
to have
a
solid
pharmacy
base
within
the
next
few
years,
so
that
we
can
start
that
tat
second sort
of
path back through
these
networks
following
the
wave
we're
in
now.
Okay.
But
I
guess
maybe
if
you
can
just
expand
on
is
there
an
overhang
here,
so
something
that
that
is
stalling
maybe
the
take-up
on
that
pharma
module,
you
guys
have
certainly
been
developing
product
for
quite
a
few
years.
The
commercial
rollout,
I
think,
is
at
least
one
year
on
– has
been
in
existence
for about – getting
close
to
one
year.
Is
there
sense
that
things
are
maybe
stalled out
for
a certain
reason,
maybe
to
the
pandemic?
And –
or
is
the
observations
you're
making
on
the
pharma
side
very
similar
to
what
you would
have
observed
on
the
med-surg
side,
so
we
should
expect
a
similar
type
of
adoption
curve?
It is – I
think
you're
right
on
both
points.
It
is
similar.
Like,
when
we
first
got
into
for
instance
OR,
we
were
three
or
four
years
commercial
before
it
started
turning
into
any
kind
of
a
wave.
They're
just
– everyone
wanted
to
see
it
running
for
a
couple
of years
before
they
were
ready
to
adopt
it.
So,
we
had
to
get
the
first
couple
of
networks
up
and
live
and
happy
and
saying
good
things.
And
then
even
then,
it
took
a
couple
more
years
before
people
were ready
adopt
it
for
themselves.
So,
it
is
following
that
same
pattern.
At
the
same
time,
there's
no
question
the
pandemic
has
affected
it.
Our
second
pharmacy
client
that
was
rolling
out
the
pharmacy
module,
the
pandemic
has
delayed
their
project
by
probably
12 to
15
months.
So,
the
pandemic
is
definitely
affecting
it.
But
it
overall
is
following
the
same
kind
of
pattern
what we've seen
in
the
past.
Okay. And
then,
maybe
just
some
commentary
you
alluded
to
expanding
the
[indiscernible]
(41:24) supporting
the
Sis.
Can you just
give
us
an
update on
where
things
stand
with
the
workdays
with
the KPMGs,
as
far
as
how
much
of
their
pipeline
they're
contributing
that
continues
to
grow?
And
if
you've
seen,
I
believe
Workday
has
been
historically
more
healthcare
centric;
and
KPMG,
I
believe,
has
been
more
retail
centric,
have
– has
either
one
been
successful
or
showing
signs
of
– of
cross
selling
or
crossing
over
to
other
markets
specifically
on
the
Workday
site?
No,
I
would
say, Workday
is
still
predominantly
healthcare
and
has
remained –
it's
actually
remain
more
healthcare
focused
than
I
thought
it
would.
But
we're
now
seeing
activity
in
a
number
of
counts
again
with
them.
There
is
in
total –
our
total
pipeline
is
up
to
about
27%
now
partner
influenced.
Interestingly,
we
looked
at
the
last
year
and
we
can
see
that
we
entered
the
year
with
about 21%
partner
influenced
in
our
pipeline.
And
yet
if
you
look
at
closed
deals,
30%
of
the
closed
deals
were
partner
influenced,
which
again
sort
of
highlights
that
fact
that
when
you
have
a
partner
involved
in
the
account,
your
win
rate
goes
up.
So,
your
percentage
of
one
deals
ends
up
being
more
partner
influenced
than
your
pipeline
actually
is.
But
we're
seeing
good
headway
there.
We're
still –
I
would
say
though,
most
of
our
active
partners
are
either
in
healthcare
or
in
pure
retail.
We're
having
really
good
success
with
–
right
now,
in
the
healthcare
space.
We've
mentioned
accounts,
companies
like
Deloitte
and
KPMG
that
are
working
with
us
in
healthcare.
And
we've got – and
of course,
we've got
the
workday relationship,
and
we
recently signed
a
partnership
agreement
even
with
Infor.
Infor
used
to be
sort
of
more
of
a
competitor
to
us
in
the
healthcare
space.
And
we
signed
a
partnership
agreement
with
them
to
cooperate
in
the
space.
So,
that
is
going
very
well.
Retail,
we've
always
had
partners
around
the
world,
European,
North
American,
even
Asia
Pac
partners
there. And
the
complex
distribution
space
is
the
space
where
I
think
we
still
lag
in
terms
of
partners.
And
it's
something
that
our
partner
team
is
putting
a
really
focused
effort
into
is
to
try
to
build
out
who are
more
of
an
SI
network
around
complex
distribution.
So,
we're
probably,
I
would
say,
we're
two
years
behind
healthcare
in
where
we
are
in
complex
distribution.
Okay.
I
appreciate
the
color.
Thanks
for
the
questions.
Thanks
for
the
responses. I'll pass the mic.
Thanks.
Thank
you.
Our
next
question
comes
from
the
line
of
Andy
Nguyen
of
Raymond
James.
Please
go
ahead
with
your
question.
Hi.
This
is
Andy
on
for
Steven
Lee.
I
just want
to
start
with
the
questions
on
if
there's
any
metrics
you
can
share
that
showed
the
impact
of
the
investment
in
sales
and
marketing
as
we're
not
seeing
the
significant
impact
on
the
earnings
and
deal
count
yet?
Yeah.
I
mean, Andy,
I
think
probably
what
you
want
to focus
on
there,
what
we
focus
on
is
really
around
SaaS
ARR
bookings,
and
those
are
up
23%
this
year
compared
to
last
year
for
the
nine-month
period.
So,
once
you
start
looking
at
enough
quarters
there,
the
sort
of
the
lumpiness
goes
out
and
you
kind
of
start
to
see
the
trend.
So,
that's
number
one.
Number
two
and
Peter
mentioned
this
during
his
comments
a
bit,
we're
seeing
some
really
robust pipeline
and
pipeline
activity.
And
we
invested
quite
a
bit
in
particular
in
healthcare
and
our
sales –
sales
and
marketing
bringing
AEs
for
healthcare,
et
cetera.
And
we
are
starting
to
see
these
[indiscernible]
(45:34) the
newer
AEs
successfully
closing
deals. We've
had
a
couple
closed
in
a
couple
of recent
quarters
from
newer AEs
that
have
been
around
for
sort of
less
than
two
years.
And
if
we
look
in
our
pipeline
right
now
and
focus
on
who's
in
those
deals
in
our
pipeline
and
where
the
growth
is
coming
from,
we
see
a
great
penetration
from
the
new
AEs
that
we've
brought
on
in
the
last
–
within
the
last
two
years
that
are
driving
a
nice
chunk
of
that
pipeline
growth.
So,
it's
building. We
see
it
in
growth
in
pipeline
and
we're
seeing
it
in
results
in
SaaS
ARR
bookings.
Yeah.
Thanks,
Mark.
Just
touching
on
that
pipeline
point,
at
what
percentage
of
the
pipeline
is
influenced
by
the
partner?
Yeah,
it's
–
I
think
Peter
mentioned
27%.
I
think
it's
actually
slightly –
maybe
we're
rounding
there,
but
I
think
it's
slightly
higher.
It's
28%
right
now
and
that's
up
from
low
20s
a
couple of
quarters
ago.
Yeah.
Thank
you.
And
my
last
question
is this.
So,
I'm
looking
at
the
free
cash
flow
year-to-date,
and
I
know
– I
think
you had
touched
on
the
primary
reason
for
the
decrease
in
free
cash
flow
is
the
timing
of
the
ARR.
But
I
think
year-to-date
it's
down
by
76%
comparing
to
last
year.
So,
I'm
just
wondering
why
is
it
down
so
much
and
could
we
expect
Q4
to
be
muted
as
well?
Yeah.
I
think
– I
mean,
I
think
if
you
look
back
and
you
see
those
DSO
numbers
that
I
quoted
and you
look
back
at
our
history
there
a
little
bit, there
was –
a
year
ago,
we
were
in
this
sort
of,
I
would
say,
unsustainably
low
DSO
level
in –
kind
of
in
the
40s.
And
so,
we –
in
order
to
go – but
before
that,
we
were at –
DSOs
were
up.
And
six
months
before
that,
three
quarters
before
that,
DSOs
were
up
in
the
high-60s
and
in
the
low-70s.
So,
you
saw
last
year
that
that
kind
of
decrease
in
DSOs
went
from
70
down
to
the
mid-40s.
So,
you
had
this
kind
of
one-time
influx
of
cash
and
that's
the
comp
that
you're
looking
at.
That's the
last
year
comp
you're
looking
at.
Right
now,
our
DSOs
are
in
the
high –
mid-high
50s,
which
is
–
I
mentioned
it,
I
call
it
a
reasonable
level.
We'd
like
to
bring –
we'd
like
to
see
the
number
down
in
the
low
50s
rather
than
in
the
mid-high
50s,
but
it's still
a
reasonable
number.
But
it's
grown
up
from
the mid-high
40s
up
to
the
high
50s.
And
so,
that
consumes
some
cash
along
the
way.
We
don't
feel
like
we
have
any
kind
of
an
AR
problem.
I
know
as
we
look
at
the
–
as
we
look
at
the
balances
and
in
our
expectations
for
collections
and
our
write-off
history
has
been
just
phenomenal.
So,
we
don't
see
any
issues
there.
We
–
like
I
said,
I
would
expect
that
DSO
number
comes
back
down
into
the
lower
50s,
that's
going
to
create
some
less
strain
on
usage
in
working
capital.
And
then,
the
seasonality
of
our
Q4
such
that
it
tends
to
be
a
high
cash
quarter
for
us
both
around
our
billing
cycles,
but
also
because
of
our
tax
credits
and
the
cash
flow,
the
one-time
a
year
tax
–
cash
flow
that
comes
from
those
tax
credits
is
in
our
Q4.
Got
you. Thank
you.
I'll
come
back
in line.
Thanks.
Thank
you.
[Operator Instructions]
And
at
this
present time –
actually,
we
do
have
one
question,
it
comes
from
the
line
of
John
Shao
of
Finance –
my
apologies,
National
Bank
Financial.
Please
go
ahead.
Hey,
good
morning,
guys.
I
just
have
a
quick
question
on...
Hey,
John.
...hardware
revenue,
17%
quarter-over-quarter
increase
that
looks
really
decent.
So,
I'm
just
curious,
how
should
we
read
about
this
quarter-over-quarter
increase
given
the
fact
that
the
supply
[indiscernible]
(50:14)
is
still
fragile
today?
I
missed
the
very
beginning
of
that,
John,
which
–
were
you talking
about
a
revenue
line
there?
Hardware
revenue,
the 17%
quarter-over-quarter
increase.
Just
how...
Yeah.
Yeah,
how
do you
look
into
that
number?
Yeah.
Yeah,
that's
–
it's
a
tricky
one,
John,
and
it's
a
tricky
one
for
us
to
call.
That
was
a
big
outsized
quarter
for
us.
If
you
look
at
our
history,
now
it
was
a
– of
a
large,
outsized
quarter.
We
have
–
still
have
some
pretty
robust
pipeline
there
and
some
pretty
robust,
I
should
say
we
have
some
pretty
robust
backlog
there.
Some
of
that
stuff
is,
we
do
have
some
I
would
say
some
trickiness
with
supply
chain,
getting
this
stuff.
It's
the
vast
majority
of
what
goes
through
there
is
third-party
stuff.
We
do
have
a
little
bit
of
proprietary
stuff
that
we
put
together
and
sell
there.
And
we
have
a
supply
chain,
some
supply
chain
issues
on
that.
So,
it's
kind
of
hard,
it's
kind
of
– it's
even
hard
for
us
to
determine
with
a
level of
accuracy
when
that
backlog
is
going
to
ship.
So,
I
think,
long
story
short,
I
think
that
what
you
saw
in
that
Q3
was
an
outsized
hardware
quarter. But
we
do
have
some
pretty
reasonable
backlog
for
that
now
still
today.
Okay,
thanks.
Another
question
on
the
– it's
on
the
gross
margin.
43%
for
the
quarter,
which
is
down
from
45%
from
last
quarter.
So,
I'm
just
curious,
how
should
we
see
that
–
how
should
we
see
the
trend
of
the
gross
margin
in
the
upcoming
quarter?
And
how
much
is
this
– is
this
quarter's
gross
margin
decline
related
to
the
FX?
Yeah.
Yeah.
So,
a
couple
of
things
there
like
that
48% –
43%
sort
of headline
gross
profit
margin
number
compared
to
48%.
So,
there's
a
5%
swing
compared
to
last
year.
If –
so,
I'd
dissect
that
in
a
couple of
different
ways.
Number
one,
if
you
look
at
our
SaaS
maintenance,
support
and professional
services
margin,
it's
– it
was about
47%
in
that
quarter.
So,
just,
like,
in
an
absolute
sense,
it's
a
higher
number.
It's
a
more
robust
number.
That
sort
of
level,
I
think,
is
probably, we're
still
sort
of investing
there.
So,
I
don't
think
that's
an
unusual
margin
level
for
the
near
term
there.
What
is
going to
make
the
thing
move
around
is
the
mix.
So,
that,
our
headline
number
was
43%,
but
our
SaaS
maintenance,
support
and
professional
services
number
was
47%.
So,
the
hardware
number,
which
is
the
lower
margin
number,
is
diluting
that
profit
margin
down
to
43%.
And
then,
number
two,
if
you
compare
the
43%
to
the
48%,
there's
like
a
5-percentage
point
swing
in
that
headline
number.
And
as
I
mentioned
in
the
in
the
comments,
there's
three
things
in
there.
There's
FX,
there's
mix
and
there's
investment
like
there's
also
cost
increase
investment.
And
if
you
look
at
how
those
contributed
out
5%,
FX
is
about
2%
of
that
5%,
2
percentage
points
of those
5%,
revenue
mix
is
about
2
percentage
points
of
those
5%
and
cost
investment
is
about
1
percentage
point
of
those
5%.
Okay.
Thank
you
much.
Appreciate
the
color.
Thank
you.
[Operator Instructions]
And
at
this
present
time,
no
one
else
has
registered
for
any
questions.
Please
continue
with
your
presentation
or
closing
remarks.
Thank
you.
Well,
that
concludes
the
question-and-answer
session.
Just
one
overall
comment
to
make
I
think
with
regard
to
a
number
of
these
questions,
the
stock
market
has
continued
and
the
investment
community
has
continued
to
sort
of
shift
priorities
from
growth
to
profitability
and
with
probably
more
recent
emphasis
on
profitability
and
maybe
less
on
growth.
And
so, in
that
sentiment
tends
to
move
around
a
little
bit.
We
continue
to
run
a
long-term
game
plan
here
that
calls
for
a
heavy
emphasis
on
growth,
investing
in
growth
as
much
as
possible
to
drive
a
solid
growth
in
the
top
line
and
particularly
solid
growth
in
the
SaaS
members
while
trying
to
respect
a
reasonable
level
of profitability.
So,
that
continues
to
be
our
strategy.
We
continue
to hold
the
line
on
that.
And
certainly,
as
you
interpret
these
numbers
and
look
forward
to
future
quarters,
you
can
know
that
that's
what
we're
trying
to
do.
Sometimes
there's
lumpiness
gets
pushed
around
a
little
bit,
but
the
goal
is
primary
emphasis
on
growing
that
SaaS
number,
but
maintain
profitability
at
a
reasonable
level.
Okay.
But
that –
it
concludes
our
call,
and
thank
you
for
joining
us.
And
as
always,
if
you
have
additional
questions,
please
do
not
hesitate
to
give
Mark
or
I
a
call.
Thanks
and
have
a
great
day.
Thank
you.
That
does
conclude
the
conference
call
for
today.
We
thank
you
for
your
participation
and
ask
that
you
please
disconnect
your
lines.