Tecsys Inc

TSX:TCS

Earnings Call Transcript 2020-Q4

[Operator]

Good morning, everyone, and thank you for standing by. Welcome to the Tecsys Fourth Quarter and Full Year Fiscal 2020 Results Conference Call. Please note that the complete annual and fourth quarter report, including MD&A and financial statements were filed on SEDAR after market closed yesterday. 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 would like to remind everyone that the call is being recorded Thursday, July 9, 2020, at 8:30 Eastern Time. I would 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 morning, everyone. We appreciate you joining us for today's call. Before getting into a discussion of our fiscal 2020 fourth quarter and year-end results, I'd like to address the topic of COVID-19, a topic that is extremely relevant to our business, specifically as a leader in the healthcare supply chain. The Tecsys organization has responded and adapted to the challenges of the COVID-19 operating environment in, frankly, an incredible and agile manner, which is reflected in the results we're about to review. I'm proud of the efforts of our team members, of our clients and our partners, who work together to ensure our customer needs were met under very challenging circumstances. After market closed yesterday, we issued our fiscal 2020 fourth quarter and year-end financial results. And a copy of those results is available on SEDAR and on our website at tecsys.com. The full year results are audited. Joining me today is Mark Bentler, our Chief Financial Officer. I will start by summarizing the key events of fiscal 2020 and 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. There are 4 key highlights that I would focus on. Our transition to a SaaS model, revenue quality and growth, our performance in the face of the pandemic and our balance sheet. First, the ongoing transition to the SaaS business model. As many of you know, we made the strategic decision to migrate to SaaS early in fiscal 2019. As we entered fiscal 2020, we were optimistic that this transition to SaaS would lead to higher margins and more predictable revenue streams in the future, although we were cautious about the impact of our transition to SaaS on the growth trajectory of our revenue streams in the short term. Little did we anticipate that the SaaS offering, combined with exceptional professional services performance, would actually begin to drive our growth so quickly. We have learned that not only that SaaS improved the quality of our revenue streams, it has also made it easier for both new and existing clients to buy our software solutions. Secondly, I want to highlight that our diversified and increasingly recurring revenue streams protected us from demand volatility that many other companies experienced during the early days of the COVID-19 pandemic, which occurred during our fiscal fourth quarter. Our focus on 2 key business segments the healthcare supply chain and digital commerce markets, both of which have experienced significant growth, also helped our performance, a trend we expect to continue into the post pandemic world. Our record bookings during the fourth quarter of fiscal 2020 is an encouraging, leading indicator towards ongoing performance in both of these economic sectors.Third, in the face of the COVID-19 pandemic, I would like to point out that Tecsys' ability to continue to progress sales cycles, sign new orders and execute project implementations has not been affected adversely by the pivot to remote work. Our multi-tiered customer care and support teams have adopted quickly and are providing effective support to both our clients and channel partners, all remotely. Our ability to shift so effectively to remote work with minimal disruption to execution on all fronts is a testament to our decision a few years ago to rearchitect our software platforms to operate in the cloud. Our IT teams work diligently to shift employees and continue to support them as they worked remotely. The outcome of the COVID-19 pandemic offers Tecsys unforeseen market opportunities, which we plan to exploit by accelerating investment in channels and direct sales development and marketing programs to boost our ability to gain our market share rapidly.The healthcare sector needs to fix and modernize outdated supply chains that were stressed to their limits by the pandemic, and Tecsys has proven to be among the best cloud-based solutions available on the market. Our SaaS approach has made it easier than ever for healthcare systems to buy and deploy efficiently and effectively, especially ahead of potential future waves of COVID-19 outbreaks. Our SaaS customer service gives us a unique capability to be flexible and responsive as our customers repair and upgrade their supply chains.The roughly 50% jump in the digital economy appears to be permanent, and most experts agree that this becomes a new baseline for future growth. Our enhanced global omnichannel solutions have Tecsys positioned well to help our clients navigate increasingly complex supply chain logistics as they quickly evolve to compete for the consumer doorstep. Through a combination of excellent execution, the signing of 2 significant new hospital networks and new market conditions created by the COVID-19 pandemic, Tecsys had a record fourth quarter. During the fourth quarter, we booked a record $40.9 million of contracts, an increase of 113% over the $19.2 million recorded for the corresponding fourth quarter of fiscal 2019. Bookings for our healthcare business was 58% of total bookings for the quarter. Total contract bookings grew 78.3% to $112.7 million for all of fiscal 2020, up from $63.2 million in fiscal 2019. We had a record backlog of professional services as of April 30, 2020, which was $35 million, up 42.8% compared to $24.5 million reported last fiscal year-end.And finally, I want to turn to our balance sheet. In late April of this year, we completed an oversubscribed $23 million equity bought deal. This transaction, combined with our operational performance, has resulted in the strongest balance sheet the company has ever had. This provides management with unprecedented flexibility to aggressively seek new opportunities and to build upon and accelerate ARR growth, that's annual recurring revenue growth, of course, in our key segments.Prior to handing the call off to Mark, I would like to summarize that the arrival of the COVID-19 global pandemic during the fourth quarter of 2020 had minimal impact on our financial performance, although the impact on Tecsys' employees was enormous. And I'd like to thank every single employee for adopting and adapting to our new normal so quickly and effectively, barely missing a beat while providing our clients exceptional and uninterrupted service. Mark will now provide further details on our financials for the year and the quarter.

[Mark J. Bentler, CFO & Secretary]

Thanks, Peter. We're pleased that our performance for fiscal year 2020, and especially the fourth quarter, was not materially impacted by the COVID-19 pandemic. What is most encouraging to our outlook is record bookings posted during Q4 of 2020, including record SaaS bookings.First, I'd like to report the fourth quarter results in more detail. Of note, the fourth quarter of fiscal 2020 is the first quarter that's directly comparable to the prior year quarter, in that the operating results from both of our acquisitions in 2019 were included in both of those quarters. In the fourth quarter of fiscal 2020, total revenue was a record $27.8 million, 20% higher than $23.2 million reported for Q4 of 2019. Our largest revenue streams, Professional services and Cloud, Maintenance and Subscription revenue, both experienced strong double-digit growth. Professional services revenue for the fourth quarter was $10.8 million, up 20% from $9.0 million reported for the same quarter last year. Driven primarily by SaaS deployments, our Cloud, Maintenance and Subscription revenue increased 14% year-over-year to $10.6 million in Q4 of 2020 from $9.4 million in Q4 of 2019. Led by the Tecsys A/S division in Denmark, previously known as PCSYS, third-party product revenue increased in the fourth quarter by 56% to $4.2 million, compared to $2.7 million reported in Q4 of the prior year. In the fourth quarter of fiscal 2020, proprietary product revenue was $1.7 million, up 6% from $1.6 million in Q4 of 2019. Interestingly, despite record SaaS bookings in Q4 of fiscal 2020, proprietary license bookings were slightly higher than the same period last year. We do continue to have certain customers and prospects that purchase perpetual licenses, and we expect this to continue in the future. That said, while short-term lumpiness and license bookings will continue, we have seen a continued general trend by our prospects to purchase SaaS, and we expect this to continue. In full year fiscal 2020, 77% of our software product bookings were SaaS, compared to 23% perpetual license. This compares to 33% SaaS and 67% perpetual license in fiscal 2019.Bookings are a leading indicator of our future revenue performance. In the fourth quarter, as Peter mentioned earlier, we had a record quarter of $40.9 million in bookings, despite having to redefine how we work remotely and in real time. In fact, bookings were up materially from $19.2 million recorded last year. SaaS subscription bookings, measured on an annual recurring revenue basis, were a record $4.1 million in Q4 of 2020, up 356%, compared to $0.9 million reported for Q4 of 2019. The significant increase in bookings is a leading indicator of accelerating SaaS revenue.Professional service bookings in Q4 2020 increased 127% to $20.7 million from $9.1 million in Q4 of 2019. During the quarter, we also booked 2 significant new hospital networks, which helped to skew total bookings in the quarter towards the healthcare segment. As Peter mentioned previously, approximately 58% of total bookings in Q4 were in healthcare.For the fourth quarter, total gross profit increased to $12.9 million, up 18% from $10.9 million reported for Q4 of 2019. Total gross profit margin declined slightly to 46% in Q4 2020, compared to 47% reported in the prior year quarter. The decline is due to a higher mix of hardware revenue.Switching now to our expenses for the fourth quarter. Operating expenses increased to $12.3 million, higher by $0.6 million or 5%, compared to $11.7 million in Q4 of 2019. Profit from operations was $0.6 million, compared to a loss of $0.8 million reported for Q4 of 2019. The increase in profits was a result of higher levels of Professional services and Cloud, Maintenance and Subscription revenues, which provided stronger margin contribution as well as stronger contribution from acquisitions made in fiscal 2019. Profit from operations was also positively impacted by lower acquisition costs, favorable impact from foreign exchange of $0.6 million and lower travel costs due to COVID-19 outbreak, partially offset by higher bonus costs. Adjusted EBITDA was $2.0 million in Q4 of 2020, compared to $0.7 million reported for Q4 of 2019. Strong Cloud, Maintenance and Subscription as well as Professional services contribution were performance drivers, as mentioned previously. Q4 2020 adjusted EBITDA was also positively impacted by $0.4 million resulting from the implementation of IFRS 16. Net profit was $0.4 million or $0.03 per share in Q4 2020, compared to $0.1 million or $0.01 per share reported for the same period in fiscal 2019. Now I'll provide details on full year fiscal 2020 performance. Total revenue in fiscal year 2020 was $104.9 million, up 37% from $76.4 million reported for the previous fiscal year. Organic revenue growth, adjusting for acquisitions, was at 14%. We saw strength across all segments. Total ARR, annual recurring revenue, at April 30, 2020, was $48.1 million, up 26%, compared to $38.3 million at April 30, 2019, and up 13% from $42.5 million at January 31, 2020, the end of our prior quarter. Foreign exchange movements had a $1.0 million positive impact on ARR during fiscal 2020. Cloud, Maintenance and Subscription revenue was $41.1 million, up 31% from $31.3 million reported for fiscal year 2019. Organic growth was 13%. SaaS revenue, which is included in Cloud, Maintenance and Subscription revenue increased to $9.0 million in fiscal 2020, up 279% from $2.4 million in fiscal 2019. SaaS revenue in fiscal 2020 grew to 22% of total Cloud, Maintenance and Subscription revenue, up from 8% in fiscal 2019. At April 30, we had $14.0 million of contracted SaaS revenue that we expect to recognize next fiscal year, in fiscal year '21.For fiscal year 2020, proprietary products revenue, which we define as internally developed products, including proprietary software sold as perpetual licenses and proprietary hardware technology products, declined by 22% in fiscal '20 to $5.4 million from $6.9 million in fiscal 2019. This decline is consistent with the general trend of product bookings shifting to SaaS. For the full year fiscal 2020, third-party product revenue increased to $15.9 million from $6.8 million, an exceptional 134% increase, due primarily to a full year of revenue recognition from the acquisition of PCSYS, which is now known as Tecsys A/S. Total gross profit increased to $50.3 million, up $12.9 million or 34% in fiscal 2020, compared to $37.4 million in fiscal 2019. Total gross profit margin declined slightly to 48%, compared to 49% reported for fiscal 2019. The slight decline was due to lower perpetual license revenue and a higher mix of lower-margin hardware products revenue. Overall services margin, combining cloud, maintenance and subscription with professional services, improved to 51% in fiscal 2020, compared to 49% for the same period in fiscal 2019.Now turning to our expenses. For the full year fiscal 2020, operating expenses were $45.6 million, an increase of just over 16%, compared to $39.2 million reported for the previous fiscal year. The majority of the increase is attributable to the acquisition of Tecsys A/S and order dynamics, which contributed $5.6 million of the increase. For the full fiscal year 2020, profit from operations was $4.7 million, compared to a loss from operations of $1.8 million reported for fiscal 2019. Contributing to the increase in profit is higher growth and higher-margin Professional services and Cloud, Maintenance and Subscription revenue, stronger contribution from FY 2019 acquisitions, favorable impact from foreign exchange of $1.3 million, lower acquisition costs of $1.3 million and nonrecurring rebranding program cost of $0.7 million.For the full year fiscal 2020, adjusted EBITDA was $10.3 million, up 270%, compared to $2.8 million reported for fiscal 2019. In addition to items mentioned previously on profit from operations, adjusted EBITDA was positively impacted by $1.3 million from the implementation of IFRS in fiscal 2020.Net profit for fiscal 2020 was $2.3 million or $0.18 per share, compared to a loss of $7 million or $0.06 per share for fiscal 2019.Finally, we ended the year with a strong balance sheet position, including the impact of our Q4 2020 equity raise, which contributed $21.7 million of net cash. At April 30, 2020, we had cash and cash equivalents and short-term investments of $37.5 million and debt of $10.8 million. I will now turn the call back over to Peter to provide some outlook comments.

[Peter Brereton, CEO, President & Director]

Thanks, Mark. Tecsys enters 2021 with its strongest balance sheet backlog and sales pipeline of its nearly 40-year history. As demonstrated by the bookings, which accelerated quarter-over-quarter throughout fiscal 2020 ending with almost $41 million in the fourth quarter, we find ourselves positioned uniquely at the nexus of 2 of the most urgent market opportunities around, which are healthcare and the digital economy. On the healthcare front, our own pipeline is providing us with all of the data we need. Between the growing acceptance of our point-of-use solutions and the failing grade of many existing hospital supply chains demonstrated during the pandemic, our market space is definitely on the move.Turning to converging distribution and to contextualize how massive our market opportunity is. From 2000 until March of 2020, the U.S. digital economy grew from 0% to 16% of total consumer sales. During the first 8 weeks of the COVID-19 pandemic, the digital economy jumped by more than 50% to represent 27% of total consumer sales. In fiscal 2021, we plan to maximize the market opportunities that have emerged in healthcare and the digital economy due to the likely permanent shifts caused by the COVID-19 pandemic. Tecsys is well prepared at exactly the right time to maximize a unique opportunity. We plan to exploit these previously unforeseen market opportunities by accelerating investments in channel and direct sales development and marketing programs to boost our ability to gain more market share rapidly. Our investment in the Workday relationship has proven to be successful. Over the coming year, we will intensify this relationship and accelerate our reach to other channel partners. Although our organic sales and marketing expenses have been relatively stable over the previous 18 months, we plan to expand our direct sales capabilities to exploit emerging opportunities globally. We also plan to make a commensurate investment in R&D. Although we plan to protect profitability, profit margins will be impacted, of course, in the short term as we invest for growth in fiscal 2021. 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.Fiscal 2020 was a superlative year for Tecsys. And based upon our contract bookings and backlog, the outlook for fiscal 2021 appears to be the best yet. While market conditions change quickly, as proven by the COVID-19 pandemic, Tecsys has never been in a stronger financial position to weather future sudden market volatility, if it were to occur. Notwithstanding market volatility, we recognize that Tecsys is in a unique position to benefit from major short-term and permanent market opportunities in healthcare and the digital economy. We plan to aggressively exploit these opportunities by investing to gain market share quickly.In summary, I want to highlight key themes for fiscal 2021. First, we will continue to maintain a laser focus on developing and growing our SaaS revenue model, in particular and annual recurring revenue generation, specifically. 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. We will keep you posted. Thirdly, we plan on investing in our direct sales channel to exploit the opportunity. Although this may temporarily suppress the trajectory of our earnings margins, we believe that the scale of the opportunity will be vastly more valuable to shareholders. We also continue to expand and refine our omnichannel business platforms to service the evolving needs of both our healthcare supply chain and converging distribution market segments. Remember, change is what drives our business. And the COVID-19 pandemic has brought monumental change that continues to turn the 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]

Congrats on another solid quarter, guys. Peter, I appreciate your remarks on the impact of COVID on your outlook. I think last time we spoke, we weren't in full lockdown mode yet. So I'm just wondering if you could give us a bit of an update, I guess, on how conversations are evolving with your healthcare clients and what's happening on the ground? I think the -- as you pointed, the inefficiencies in supply chains have become evident to everybody. So the strong booking numbers that we saw during the quarter, are they linked to that? In other words, are the hospitals addressing the supply chain inefficiency like in a more meaningful way? Or is the attention still focused, I guess, on the second wave of COVID in the U.S.?

[Peter Brereton, CEO, President & Director]

Yes. Amr, there's a bit of both. Some of the large deals, the 2 very large deals we signed in healthcare, for instance, in the fourth quarter really had nothing to do with COVID. They were part of sort of long-term strategic moves by those networks. But several of the smaller deals signed in the quarter were a direct result of COVID. I mean literally organizations looking at their set-up and the way they were structured and saying, okay, whenever this -- whenever the local wave hits us, because it's very much sort of going in waves regionally, we need to be better prepared to manage our own supply chains. And we can't just depend on distributors to allocate us product. I mean that's how so many of them got into trouble is by -- depending on big national distributors to sort of allocate product. And of course, when you end up with a national shortage, everybody only gets part of what they need. So they -- so some of those smaller agreements, and still substantial, but not the elephant-sized agreements, signed in the fourth quarter, were directly resulting from, sort of, "Hey, we need to be ready for this thing. This pandemic's not going to go away in the short term. It's going to be around for a while." And so we ended up sort of standing up a couple of sort of emergency warehouses, in some cases, without even really doing what you would normally do. I mean, normally, you put in a consolidated service center and like that, you interface it to all the back-end systems and you sort of automate all your forecasting and demand planning and you do all kinds of things. A lot of that work was sort of left for later. It was like, you know what, just stand up the warehouse, hire the people, get the stock in, put the basic warehouse management solution in and at least, we're equipped to sort of manage the ins and outs on a -- even if we have to sort of rekey the orders between the back-end systems and the warehouse management solution. So some of that work was done. The work is ongoing. We continue to have implementations, go-lives, et cetera. Almost everybody working from home. We do have a few consultants, U.S.-based consultants that are working on-site at various client sites, helping them with their go-live. But in many cases, the work is all being done remotely. So I mean at this point of our, whatever we're at right now, 550 employees or something like that, we've probably got a total of maybe 30 that are working in offices. Pretty much everyone else is working from home with occasional on-site client work.

[Amr Ezzat, Analyst]

Okay. So I guess what I gather is your feel is we obviously started to see some benefits, but there's much more to come in terms of bookings?

[Peter Brereton, CEO, President & Director]

We think there is. In healthcare, as I said, I mean, for years, we used the tagline in healthcare, "your supply chain matters." And it's like you've got a whole bunch of senior management players in healthcare sort of suddenly realizing that it's absolutely true. Your supply chain truly does matter. I mean you can't get through this kind of a thing and keep your staff safe and keep your patients safe and have good outcomes and so on, if you don't have an ability to manage your own supply chain well.

[Amr Ezzat, Analyst]

Great. Great. Then have you seen any changes in your net retention rates since mid-March? I suspect not, but...?

[Peter Brereton, CEO, President & Director]

Are you referring to people or customers?

[Amr Ezzat, Analyst]

Customers.

[Peter Brereton, CEO, President & Director]

No. No. We've seen a couple of small bankruptcies among our smaller customers. But in most cases, they're not even -- I mean they're in bankruptcy protection, but continuing to operate. So they remain as clients. They're just going through restructuring. A couple of the smaller ones are truly going out of business. So ultimately, I guess that will affect retention rates. But they're on the very small end of the spectrum in terms of what we support. So the numbers are, frankly, not material. I mean we continue to show net retention rates when you combine sort of price increases with cancellations into a net number, we continue to run around 106%.

[Amr Ezzat, Analyst]

Okay. Okay. That's great. Okay. Maybe one for Mark. When I'm looking at your Cloud, Maintenance and Subscription revenues, they're up a healthy 14% year-on-year, but sequentially, they were flat from Q3. I'm just trying to reconcile what's happened there. Because your ARR grew sequentially 13%. So I would've expected a bit of, I guess, like an uptick sequentially on the revenue side as well. Was it just timing or...

[Mark J. Bentler, CFO & Secretary]

Yes. Yes. It's a good question, Amr. Some of the contracts that we signed in Q3 and in Q4, in fact, it kind of depends when they sign in the period. Like the Q4 stuff, a lot of that, we didn't start picking up revenue or material revenue on that in Q4. But it's booked and it's going to start, and you're going to have a full quarter impact of it in Q1. Some of our Q -- a couple of our Q3 deals that we signed, it was actually revenue recognition around some of those ARR deals are not immediate. And there were a couple of deals that we signed in Q3 with slightly later start dates. Typically, we signed the contract and we stand up the environment and start recognizing the revenue. And typically, that happens, you sign it in 1 month and you're recognizing revenue the next month basically. But there were a couple of deals that we signed in Q3 that had sort of an extended period of time that would -- that passed before the revenue would start. So that was the -- that's why that sort of flattened out more than you would have expected between Q3 and Q4. But it's set to -- you'll start to see that stuff going through now.

[Amr Ezzat, Analyst]

Great. Great. Maybe one last one, and I'll pass the line. Can you guys speak to the M&A environments? Like valuation multiples, at least in the public markets, look considerably higher since last year. What are you guys seeing?

[Peter Brereton, CEO, President & Director]

Yes. I mean, Amr, we continue to look for opportunities that are sort of right up our ally. As we said, we still like to have a bigger footprint in Europe. We -- at some point, we need to get into AsiaPac. We continue to poke around in healthcare. But at the same time, there's no question our criteria, in effect the bar that you have to get over to be an interesting acquisition for us has definitely risen, really just because the -- our market spaces that we're pursuing right now are just hotter than we've ever seen them. I mean there is so much opportunity in healthcare. And there is so much opportunity in this converging sort of brand manager, retail distribution space as that's all coming together that we -- I just don't want our management team distracted unless it's a phenomenal acquisition opportunity. So I think the combination of the pricing that's out there that you're referring to combined with our own situation internally has us primarily focused on just driving what we already got in front of us.

[Operator]

[Operator Instructions]. Our next question comes from the line of Deepak Kaushal with Stifel GMP.

[Deepak Kaushal, Director and Technology & Communications Analyst]

I've got a couple. First, I just want to follow-up on Amr's question around COVID and the U.S. hospital situation. Peter, in the last couple of days, we've -- I've read reports about further stresses in places like Texas and Arizona and there's hotspots in the U.S. What's kind of the latest pulse as those hospitals see resurgence in spikes? And how are your discussions with customers proceeding in that context? Are they prepared? Have they prepared? Are they looking to do more? How are they reacting to this kind of second wave?

[Peter Brereton, CEO, President & Director]

There -- I mean, the distractions, again, are local. I mean we have -- we're in discussions with a number of networks, for instance, in Texas. And there's no question that right now in the short term, their senior management is sort of highly distracted with what they're dealing with. I mean you've got children's hospitals that are loading up with adult COVID patients and so on. What doesn't seem to be happening, which happened in the first wave was sort of the instruction to all of the hospital networks or the decision by a lot of the hospital networks to, for instance, shut down all elective surgeries and so on. That didn't seem -- it hasn't seemed to have happened nearly as much this time. It seems they saw very little benefit from doing that. All it did was completely knock out their most profitable revenue streams. It crippled them financially. It caused massive layoffs of nurses and so on and really didn't help. So this is the second wave, if you want to call it, I mean, I don't know whether it's continuing first wave or a second wave, whatever it is. But as this sort of rolls through different areas, we're not seeing that same reaction. So the impact on them financially is not nearly the same. But there's no question as a wave -- the intense waves seem to last maybe 6 weeks. So for that sort of intense period of time, there's no question, we've seen deals slip and management being distracted and sort of opportunities we thought would close go offline for a bit. But they seem to pick right back up again 6 weeks later. So we're not seeing a big impact other than, again, a recognition that sort of getting the stuff right is key. I mean we had one discussion with a major network a bit ago, which is where we're deployed in sort of probably 15% of their network. And in a discussion with them we said in the middle of -- with this COVID thing going on, are we still on track to continue the rollout? And their answer was, are you kidding? Of course, we are. When this thing hit, we realized that the places we had you deployed are the only places in our network where we actually know what we have. So I mean, generally speaking, it's rolling forward. But I would say that, sorry, I'm rambling a bit here, but the biggest change from the first wave that hit is the tendency for them to keep their, sort of their elective surgery and their whole revenue and financial machine running this time.

[Deepak Kaushal, Director and Technology & Communications Analyst]

Okay. That's very helpful. And then a lot of the focus in our discussions has been on the U.S. hospital market. I know Canada is a smaller market, and you guys are just starting in Europe. But what are you starting to see in those 2 markets given the pandemic? And how is the pipeline shaping up? And what would you -- or what could we kind of get a sense in terms of expectations for some material wins in those geographies?

[Peter Brereton, CEO, President & Director]

On the Canadian side, I mean, by and large, I think, as you know, we don't really bother with the Canadian hospital scene. It's too political. The decision cycles are too long. Too many times, we've won local opportunities where a region or even a sizable network has selected us and even given us sort of official congratulatory letter, you've won the deal, et cetera, only to have it killed at a cabinet level or whatever. So we're -- we've just decided, sort of, life's too short to continue to play that game. So our focus on healthcare remains the U.S. market. In Europe, the biggest areas of growth we're seeing in Europe right now are in the distributed order management platform space. We think the healthcare opportunities are still substantial in Europe. We've actually got one major deployment going on in Denmark right now in the healthcare space through our acquisition over there. They've managed to -- working with them, they've now landed a sizable opportunity there. They've gone -- they're in the process of going live and very happy with the deployment. So we are starting to see some penetration over there and over in the European market in healthcare. But the biggest opportunities in the European market right now are on the sort of the retail and brand manager side.

[Deepak Kaushal, Director and Technology & Communications Analyst]

Okay. And I've got one last question for Mark, perhaps. Wondering if you could give us a breakdown on revenue and growth rates between healthcare and complex distribution? It'd be helpful to understand the relative pace of each of these segments on an annual basis. That would be helpful.

[Mark J. Bentler, CFO & Secretary]

Yes. I mean I think if we look at sort of -- I think maybe one way to look at that is the proportionality of healthcare and what's happening on the booking side. And in Q4, we had a certain outsized componentry of our healthcare book. It was about 58% of our total bookings in the period. But if you look at that as kind of a general revenue picture during the year, that would have represented about high -- in the high 30s. About 38%, I think, it is of our total revenue, was healthcare, in the year. So that kind of gives you a little bit of idea of the proportionality. In terms of growth, I think the -- if you look at our bookings and the extent and size of the health networks that we've picked up, I think if we look in the future, a lot of these new booking businesses are ARR related. And clearly, that healthcare revenue is on a growth trajectory that's fast -- that's faster than the complex distribution. But they're both growing pretty nicely.

[Operator]

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

[Nick Agostino]

I guess just to make sure I'm clear. Peter, last quarter -- on the last conference call, you indicated that as the pandemic was making its way in, you saw some of your larger hospitals were putting in more orders at a faster rate because they had a better handle on supply chain. And some of your smaller hospitals, they were more in a panic mode, and therefore, they were deferring contracts. I know you talked earlier about some hospital deals that resulted from COVID you closed in fiscal Q4. Can you just maybe speak to whether we're starting to see, as the pandemic still persists and largely in the U.S., are we seeing more of a return to normalcy when it comes to just, I guess, demand and bookings from the hospitals between the larger and the smaller guys, even though the pandemic is still out there?

[Peter Brereton, CEO, President & Director]

We are. You can pretty much follow it, I mean, if you look at the news right now, it's pretty much the South that is really sort of taking in the teeth on -- in terms of the numbers, I mean, all across Florida, Texas, Arizona, et cetera. In those areas, there's no question, we're seeing still quite a bit of distraction. And we're sort of through the early sort of race to stand up some emergency distribution centers and so on. We're also sort of through the work to accelerate the management of the national emergency stockpile that our software was used for in the U.S. and so on. So that is all sort of running and flowing and working and so on. But the emergency stand-ups are kind of done. So -- but we're back to, in the majority of the country, 2/3 of the country, the pandemic is actually sort of not that different than where we're at in Canada. And so all across the North and the Central and so on, we're seeing sort of perfectly ordinary patterns. I mean July is typically pretty quiet -- June, July is typically pretty quiet. It's sort of a seasonal low time for us in terms of opportunities. And yet, we've got a number of hospital opportunities that we're working on trying to get closed in the next few weeks. So it's very much, as I say, if you look at any sort of the U.S. news, you can pretty much predict where we're seeing a high degree of distraction and where we're pretty much back to normal.

[Nick Agostino]

Okay. Great. And then just talking about healthcare IDNs, how -- what has the pharma demand been like, I guess, over the last 6 months and during the period of COVID? I know you've had your initial go-live well over a year ago. Are you seeing more demand, more interest in that specific module as a result of COVID? So any color there would be appreciated.

[Peter Brereton, CEO, President & Director]

I have not seen -- and that would be a good question for me to ask our sales team in more detail. But I, based on the pipeline reviews that I sit in on sort of almost weekly, I have not seen any acceleration or deceleration on the pharma side as it relates to COVID-19. It has more been around sort of general supplies and that kind of thing. On the pharma side, I mean, we continue to still be somewhat early on that opportunity. As you mentioned, we had the one go-live a little over a year ago. They followed up by rolling out the rest of their network. So they're now fully live on that. We have another account, which is in Indiana. They're going live in the next month or so. So that will be our second network. They're significantly larger than the network out West. So that will be interesting to get them up and live on pharmacy. And they're already taking calls from other networks across the U.S. to say, sort of, okay, how is it going, let us know when you're live and so on. So we anticipate -- this is the pattern we've seen typically with new modules is, you get one, takes a couple of years. You get the second one. Once the second one is live, now you've got 2 reference points. The credibility starts to build, and it's easier to then go and get sort of opportunities 3 through 5. So we'll see how that goes, but that's the stage we're at now.

[Nick Agostino]

Okay. Great. And then last question. You mentioned earlier that Workday seems to be a successful relationship. Any color on Workday's contribution in business in Q4 and as we sit here, in fiscal Q1, specifically on healthcare, but also on your complex distribution business, in general?

[Peter Brereton, CEO, President & Director]

Sure. From the standpoint of our overall Workday relationship, we've actually hit a key milestone in the last -- just in the last few weeks, in that the products are finally now fully integrated in the area where we expect the most use. So we're talking warehouse management, transportation management, which is sort of the area where we expect the most joint business with Workday. That integration is now complete. We've got one of our customers that's deploying and expect to go live in the next little while. And they've completed their full end-to-end testing and have said, it's working great. So that took quite a while, that required investment on the Workday side and it required investment on our side and the building of a cloud service to manage all the information flow back and forth between the 2 platforms and so on. But that's now done and I'd say, it's not live yet, but it is fully tested in the field and performing well. So that's a good milestone there.In terms of the overall opportunities with Workday, we continue to manage a joint pipeline. We have -- we're -- I believe, we now have 4 joint accounts. Overall, sort of, material impact. It's -- I would say it's overall not that material from the standpoint that they have not been really large deals at this point. Again, fairly typical. Larger deals tend to want to wait until they see proof out in the marketplace. So these are sort of more medium-sized opportunities that have been signed so far. But -- and they have all been in healthcare so far. We do have other opportunities in the pipeline, though, that include both complex distribution as well as distributed order management, including several actual retail opportunities where Workday is going after the financials and capital management. And we're going after the distributed order management and back-end supply chain functionality. So that's still developing. But I do think that sort of getting that first site live is going to be key to moving that relationship to the next stage.

[Operator]

[Operator Instructions]And we are showing no further questions on the audio lines at this -- oh, we do have a question, my apologies. Our question comes from the line of Gavin Fairweather with Cormark.

[Gavin Fairweather, Analyst of Institutional Equity Research]

I was hoping you could just give us a bit of a flavor of how the large point-of-use recent win kind of came together. And it seems like a very large win for you guys. So any commentary on kind of the size of that deal, if possible? And then maybe just lastly on point-of-use. If you have an updated number in terms of the penetration of the healthcare base.

[Peter Brereton, CEO, President & Director]

Yes. And like size-wise, Gavin, that -- I mean, you're right, that was a very large opportunity. It was probably on a -- frankly, it's probably 2 to 3x the size of what we would typically even call a large opportunity. So it was very large, but it was with a very large network. It's part of a continuing trend that we're seeing in the market space towards networks that really want to get to 3 platforms. They want to have a platform for human capital management and financials, they want to have a platform for electronic medical records, and they want to have a platform for supply chain. And they'll still have many other apps and so on, but the other apps will all hang off of one of those 3 platforms. So that's the push. We're seeing it as an increasing trend in the market space. The financials and human capital management platforms tend to continue to be Oracle or the Infor Lawson platform or Workday. The electronic medical records continues to be either Cerner or Epic, typically. I mean those are the 2 large players in the marketplace. And we seem to be the beneficiaries of the push for a single platform on the supply chain side. So I mean that was really the driver. They had many different sort of apps involved in that particular network. Some managing nursing supplies, in other cases, they were still very manual, et cetera. But this is a push to move to a single platform to cover all things related to supply chain.

[Gavin Fairweather, Analyst of Institutional Equity Research]

Okay. And can you give us a sense of kind of the penetration of your point-of-use solutions into your healthcare base? I'm not sure if you have that number offhand there.

[Peter Brereton, CEO, President & Director]

Yes. It's still very small. I mean part of it is we keep adding capability, right? So at one point, we said we thought we were 18% penetrated in our base. By that what we meant is, when we look at all the solutions we bring to market and we look at what our base is purchased and how much white space there still is in that base, there's still sort of 82% of it is white space. So we're 18% penetrated. But then, of course, we roll out another solution. We continue to add capability to -- for instance, where we added the ability to support cath labs, suddenly that sort of opened up a whole bunch more white space. So that our penetration number actually dropped a little bit. So it's still in the sort of 16% to 20% range, sort of, depends on how you count it. But we still see a very large opportunity. I mean if you look at the overall U.S. healthcare space, and this is just -- I mean, to me, it's an interesting way to look at the number. There's about 500 networks, a little more, close to 550 networks. We're pursuing the top 300. If you figure that an average network in the U.S., for us, is worth anywhere between $1 million and $2 million of annual recurring revenue, as they adopt our platform, you end up seeing that this -- the hospital space in the U.S. for us is worth anywhere from $300 million to $600 million of annual recurring revenue. So I mean that's what we're going after. It's a very large, very exciting opportunity, and we're the #1 player in the space.

[Operator]

We have no further questions on the audio lines at this time.

[Peter Brereton, CEO, President & Director]

Okay. Thank you, operator, and thank you for taking the time to join us today on this call. As always, if you have additional questions, please do not hesitate to give Mark or myself a call, and we look forward to talking to you later this summer to discuss our first quarter results. Thanks, again, and bye for now.

[Mark J. Bentler, CFO & Secretary]

Thanks.

[Operator]

This does conclude today's conference call. We thank you for your participation and ask that you kindly disconnect your lines. Have a good day, everyone.