Earnings call transcript: TECSYS Inc. Q4 2025 misses EPS forecast, stock dips

TECSYS Inc. reported its fourth-quarter earnings for 2025, revealing a mixed financial performance. The company reported an earnings per share (EPS) of $0.11, falling short of the forecasted $0.145, representing a negative surprise of 24.14%. Despite this, TECSYS managed to surpass revenue expectations, reporting $46.56 million against a forecast of $45.86 million. Following the earnings announcement, the company’s stock decreased by 3.54%, closing at $40.43. According to InvestingPro data, the company maintains strong profitability with a healthy gross profit margin of 60.6% and has consistently maintained dividend payments for 18 consecutive years.

Key Takeaways

• TECSYS missed EPS estimates by 24.14%, reporting $0.11 against a forecast of $0.145.
• Revenue exceeded expectations, reaching $46.56 million.
• Stock price dropped by 3.54% in after-hours trading.
• SaaS revenue showed significant growth, increasing by 29% year-over-year.
• The company continues to expand its AI capabilities and global presence.

Company Performance

TECSYS Inc. demonstrated solid revenue growth, particularly in its SaaS segment, which increased by 29% year-over-year. The company’s total revenue for the fourth quarter was $46.6 million, up 6% from the previous year. Net profit also showed improvement, rising to $1.7 million from $259,000 in the same quarter last year. InvestingPro analysis reveals impressive long-term growth with a 5-year revenue CAGR of 31% and strong financial health, earning a "GOOD" overall rating. The company’s current ratio of 2.83 indicates robust liquidity management. However, the missed EPS target overshadowed these positive developments, impacting investor sentiment.

Financial Highlights

• Total Revenue: $46.6 million (6% increase year-over-year)
• SaaS Revenue: $67.1 million (29% growth)
• Net Profit: $1.7 million (up from $259,000 previous year)
• Adjusted EBITDA: $13.4 million (39% year-on-year increase)
• Cash and Short-Term Investments: $39.3 million
• No Debt

Earnings vs. Forecast

TECSYS reported an EPS of $0.11, missing the forecasted $0.145 by 24.14%. Despite this, the company exceeded revenue expectations with $46.56 million against a forecast of $45.86 million, marking a positive revenue surprise of 1.53%. This mixed performance reflects the company’s ongoing investment in growth initiatives and its impact on profitability.

Market Reaction

Following the earnings release, TECSYS’s stock fell by 3.54%, closing at $40.43. This decline reflects investor concerns over the EPS miss, despite the revenue beat. The stock’s performance remains within its 52-week range, with a high of $47.51 and a low of $33.51, indicating moderate volatility. Based on InvestingPro Fair Value analysis, the stock appears to be trading above its intrinsic value. The platform offers 12 additional ProTips and comprehensive valuation metrics to help investors make informed decisions.

Outlook & Guidance

TECSYS projects SaaS revenue growth of 20-22% for fiscal year 2026, with total revenue expected to grow by 8-10%. The company aims to achieve an adjusted EBITDA margin of 8-9%, driven by increased investments in research and development as well as marketing. TECSYS is also focusing on enhancing its end-to-end healthcare supply chain messaging. With an Altman Z-Score of 11.67, the company demonstrates strong financial stability. Discover more detailed insights and access the comprehensive Pro Research Report covering TECSYS and 1,400+ other top stocks through InvestingPro.

Executive Commentary

CEO Peter Brereton emphasized the company’s strategic focus on AI-driven solutions, stating, "We are unlocking the full potential of data with our AI-driven Texas IQ platform." He also highlighted the company’s selective market approach, saying, "Our strategy of being selective but deliberate in the markets and geographies we pursue continues to bear fruit."

Risks and Challenges

• Potential impacts from political decisions, such as Medicaid cuts.
• Ongoing investments may pressure short-term profitability.
• Competition in the healthcare supply chain market could intensify.
• Economic uncertainties could affect customer spending.

Q&A

During the earnings call, analysts inquired about potential market slowdowns and the impact of political factors on the company’s operations. TECSYS management reassured investors of a strong pipeline and bookings expectations, emphasizing continued focus on healthcare and distribution verticals.

Full transcript - TECSYS Inc. (TCS) Q4 2025:

Conference Operator: Good morning, everyone. Welcome to Texas Fourth Quarter and Fiscal Year twenty twenty five Results Conference Call. Please note that the complete fourth quarter, including MD and A and financial statements, were filed on Cedar Plus after market closed yesterday. All dollar amounts are expressed in Canadian currency and are prepared in accordance with international financial reporting standards. Some of the statements in this conference call, including the question and answer period, may include forward looking statements that are based on management’s beliefs and assumptions.

Actual results may differ materially from such statements. I would like to welcome everyone that this call is being recorded on Friday, 06/27/2025 at 08:30AM eastern time. I would now like to turn the conference over to Peter Brereton, chief executive officer at Texas. Please go ahead, sir.

Peter Brereton, Chief Executive Officer, Texas: Thank you. Good morning, everyone. Joining me today is Mark Bentler, our chief financial officer. We appreciate you joining us for today’s call. As most of you have likely seen in the results issued last night, fiscal twenty twenty five has been another strong year for Texas.

SaaS revenue grew 29% for the year, just shy of our 30% guidance, while our core product elite grew 32% driven by high quality multisite wins and strong adoption in our core markets. Between new logos, renewing and expanding base accounts, and continued migration momentum, we are seeing sustained indicators of business health, reflecting steady progress toward our long term value creation goals, and SaaS RPO continues to grow. In health care, we added two health system providers in the quarter and completed another large migration. We also saw continued uptake in our pharmacy offerings as more health care organizations respond to DSCSA and look to drive efficiency and visibility through their supply chains. Distribution also saw continued growth with multisite deals in electrical, industrial, and health care distribution and important new customer additions in both North America and Europe.

Our strategy of being selective but deliberate in the markets and geographies we pursue continues to bear fruit. Notably, health care distribution has emerged as a dynamic vertical with increasing demand for scalable inventory management and drug supply chain security act aligned logistics across the care continuum. Our pipeline is responding accordingly. We also had another standard quarter in professional services. Q four marked another record for PS revenue, and we ended the fiscal year with the largest professional services backlog in our history at $49,000,000 That’s up 52% year over last year.

These results indicate strong ongoing demand. That said, we anticipate that professional services revenue will continue to remain variable, influenced by the timing of project deliveries and the level of involvement from integration partners. We also saw several strategic milestones since our last results call. We announced a major milestone with Roche with our SaaS platform now being progressively deployed at over a thousand sites globally. This rollout demonstrates the scalability of our system and reinforces the trust that Roche places in us to support their operations across multiple regions.

On May one of twenty twenty five, we announced the establishment of a new subsidiary in India as part of an asset acquisition that included the hiring of an India based team. This acquisition enhances our development and support capacity and capability, positioning us for long term scalability and growth. As we continue to build momentum in the market, we also saw validation of the capability of our WMatch for a fourteenth consecutive time by Gartner. Included in the challenger quadrant, we were once again recognized for our product completeness of vision and ability to execute. This is on top of the fact that Texas customers represent 40% of Gartner’s health care supply chain top 25 list for calendar twenty twenty four.

While it came just after our fiscal year end, our Texas user conference was a key event for us. It’s a chance to connect with our customers, highlight new products, build stronger relationships, and explore new growth opportunities. This year, we had our largest turnout ever with over 200 customers and prospects. We also shared that we’ll be making conference an annual event moving forward, so we’ll have this important touch point with our customers on a more regular basis. At the user conference, we announced two exciting innovations.

First, we introduced an enhanced electronic shelf label or ESL plus, which represents an important advancement in hospital supply chain management at the point of use. These are bidirectional smart tags that add real time visual cues and allow clinical teams to request additional product or rush orders in real time. Secondly, we unveiled a brand new data product we’re calling Texas IQ, a data layer that interacts with the existing Texas ecosystem. Texas IQ is a major leap forward in applied AI, and the excitement among customers and partners was evident. Built on the Databricks data intelligence platform, Texas IQ helps organizations unify fragmented data and deliver AI deliver AI powered insights across clinical, operational, and financial systems.

So we have good reason to feel confident about our position in the market, our base expansion rates, our backlog in both SaaS and professional services, and the strength of our vertical strategy. As we continue to invest in the products we sell and in our go to market strategy, Texas is proven to be among the best cloud based solutions available in the markets we serve. The steady growth we have experienced affirms our vision and strategy for shareholder value. Mark will now provide further details on our fourth quarter and year to date financial results as well as financial guidance on several key metrics.

Mark Bentler, Chief Financial Officer, Texas: Thank you, Peter. First, I’ll focus on fourth quarter fiscal twenty twenty five results. SaaS revenue growth was 29%, reaching $18,400,000. SaaS bookings were down year on year from a record 8,000,000 last q four, which was the high watermark so far for quarterly bookings, to 6,500,000.0 this q four. That 6,500,000.0, by

Peter Brereton, Chief Executive Officer, Texas: the way, is the is

Mark Bentler, Chief Financial Officer, Texas: the second highest SaaS booking quarter in our history. Q four was another record total revenue quarter at 46,600,000. That was up 6% from the same quarter last year. But if you exclude hardware revenue, that growth was 16%. Professional services revenue for the fourth quarter was a record $16,200,000.

That was up 13% from the same quarter last year. We had another solid professional services bookings quarter in q four. And as Peter noted, we ended the year with record professional services backlog. For the fourth quarter of fiscal twenty twenty five, gross margin was 51% compared to 47% in the same period last year. The key drivers here are increasing SaaS margins as well as strength in professional services margins in the quarter.

Net profit in the quarter was $1,700,000 compared to 259,000 in the same quarter last year. Fully diluted earnings per share were $0.11 in the current quarter compared to $02 in the prior year quarter. Adjusted EBITDA was $4,300,000 in Q4 of fiscal twenty twenty five compared to $2,800,000 in the same quarter last year. Turning briefly to our full fiscal twenty twenty five highlights. SaaS revenue for fiscal twenty five was 67,100,000.0.

Again, that’s up 29% from last year. SaaS bookings for the year were 17,300,000. That was actually down 7% compared to last year. While this will have the impact of moderating SaaS revenue growth in fiscal twenty twenty six, Based on the size and quality of our pipeline, we’re optimistic about the future of SaaS revenue growth. Our total revenue reached $176,500,000.

That was a three percent increase from last year. If you exclude hardware, overall revenue grew by 12%. For fiscal twenty five, our adjusted EBITDA increased to $13,400,000. That was up from 9,600,000.0 last year. That’s a 39% year on year increase in adjusted EBITDA.

Basic and fully diluted earnings per share for fiscal twenty five were 30¢. That compares to 13¢ in the same period last year. We ended fiscal twenty twenty five with a solid balance sheet. We had cash and short term investments of $39,300,000 and no debt. We used about $6,900,000 of cash in the year to buy back shares under our normal course issuer bid.

Additionally, the board yesterday approved a quarterly dividend of 8 and a half cents per share. Turning to financial guidance, we are providing fiscal twenty six guidance for SaaS revenue growth of 20 to 22% and total revenue growth of eight to 10%. We’ve decided to increase our investment in r and d and marketing in fiscal twenty twenty six to drive SaaS margin growth and SaaS revenue growth respectively. As a result, we’re revising our fiscal twenty twenty six adjusted EBITDA margin guidance to 8% to 9%, and we expect adjusted EBITDA growth in the range of 20% to 30%. I will now turn the call back to Peter to provide some outlook comments.

Peter Brereton, Chief Executive Officer, Texas: Thanks, Mark. Texas fourth quarter and full year results reflect the consistent execution and momentum we’ve built throughout the year. Our solid footprint in key markets reinforces our confidence that we are well positioned to upsell and cross sell within health care. Our value proposition in pharmacy remains compelling. We believe we are uniquely positioned to capitalize on the expanding opportunities in pharmacy and other adjacent health care vectors, which we see as an important growth engine for us.

Our conversion in general distribution also represents a substantial market opportunity. We are pursuing targeted marketplaces and geographies within this space with an expanding emphasis on health care in this market as well. We are pleased that our pipeline is robust, and we continue to see strong buyer intent across our verticals. As I mentioned in my opening, we just wrapped up our largest ever user conference in Nashville, and the energy from our customers was incredible. We heard from a great mix of voices, including presenters from Nissan, Vanderbilt Health, Mayo Clinic, Texas Children’s Hospital, Welfare Health, and Accuristics.

These customer advocates shared some amazing insights on how Texas is making a real difference for them. It’s clear we have a great opportunity to keep these conversations going, build on the momentum we’ve created, and capitalize on the market opportunity this event creates. So in summary, I wanna share with analysts and investors our key themes for fiscal twenty six. First, we will continue to invest to maintain and enhance our market leadership across the supply chain landscape with an emphasis on the end to end health care supply chain. This includes investments in product development and marketing to drive fast margin expansion and bookings growth.

Second, we are unlocking the full potential of data with our AI driven Texas IQ platform to drive value and innovation across our solutions. This will be transformational for our customers. Third, we remain deeply focused on customer satisfaction, ensuring our software is reliable, scalable and easy to use, giving our customers every reason to be passionate as it is for us. With that, we’ll open the call up for questions. Thank you.

Conference Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. You will hear a prompt that your hand has been raised. Did you wish to decline from the holding process, please press star followed by the tune. If you are using a speakerphone, please lift a handset before pressing any keys.

Your first question comes from Amir Azat with Bentham Capital Markets. My

Peter Brereton, Chief Executive Officer, Texas: first one is on your SaaS revenue guidance of 20% to 22%. It’s below what you guys have posted like 29 for fiscal ’twenty five. I’m wondering what specifically are you guys seeing in the pipeline that leads you to expect a deceleration? Is it you guys just being conservative? Or is there something more structural?

And maybe this is related. So like if you could maybe talk about how bookings and pipeline activity are trending early into the year know, with both the House and Senate advancing cuts to Medicaid, I think it’s our contrast from the last conference call when we last had it. Can you elaborate on any early signs of caution from your clients or anything like that? Sure. Mark, do wanna take the first part of that?

I’ll take the second.

Mark Bentler, Chief Financial Officer, Texas: Sure. Sounds good. So thanks for the thanks for the question, Emma. So the the the thing about our SaaS revenue, we’ve got at the end of this fiscal year, we’ve got what we think is, you know, 90% plus of our revenue for SaaS in fiscal twenty six already booked. Right?

So we’re actually if you if you kinda look at that and do the math on that, you know, if you book a if you book a a million dollar, you know, SaaS deal in,

Peter Brereton, Chief Executive Officer, Texas: you know,

Mark Bentler, Chief Financial Officer, Texas: q four, it it adds basically a million dollars of of of revenue in the subsequent in the subsequent year, you know, depending if there’s a ramp in it or, you know, if there’s a slight delayed start, which which we do from time to time. But, normally, it it starts it starts right away. So we’ve got, you know, we’ve got pretty good visibility into, you know, in the revenue in in fiscal twenty six. We’ve also got, you know, line of sight to what we believe to be some pretty robust bookings, and Peter will Peter will talk maybe to to the pipeline and and market conditions afterwards. But, you know, we’re seeing we’re seeing strong indications of of pipeline activity and expecting strong bookings on top, you know, to add accretively to that backlog of class that we have at the end of the year.

Peter Brereton, Chief Executive Officer, Texas: Yeah. And would just add, Emory, that, you know, as Mark commented, we’re not at this point seeing a slowdown in inactivity. There’s no question. It’s on everybody’s mind. I I was down at the SMI conference, whatever it was, two weeks ago, I guess.

And, you know, these are all supply chain leaders from hospital organizations. And, you know, the general consensus there was that, you know, all these sort of threats that cut Medicaid are are sort of political fostering. Most of the dates that they’re talking about in terms of when those cuts would kick in if this, you know, if this bill passes with those cuts in it, The dates are sort of staggered out over the next couple of years with sort of lots of time to delay or cancel those cuts before those dates actually arrive. So the the feeling generally seemed to be that it was, you know, largely political posture and it wasn’t gonna happen to any any party that actually cut 16,000,000 people out of Medicaid is, you know, is doomed to lose the next election. But at the same time, there’s no question.

It was top of mind for everybody. I I mean, it was a frequent matter of conversation, but the consensus seemed to be that it was unlikely to actually bite. So we’ll see. We’re keeping an eye on it. At this point, though, we’re not seeing any slowdown in activity.

I mean, as we mentioned, we we closed, you know, two deals in the fourth quarter when this was already sort of in the air, like two new accounts, you know, plus some expansions. So and and certainly, the pipeline activity in the first quarter is showing, you know, is is remaining quite strong. So we’ll see how this ends. We’re keeping an eye on it, but at this point, it’s it’s still all system to go. Fantastic.

Appreciate the color. I think one of the highlights of the quarter is the gross margin expansion on staff. Can you elaborate on the key levers driving that? It seems to be tracking ahead of expectations. Is there anything abnormal helping the expansion this quarter specifically?

You know, no. It I mean, it’s it’s going to continue to bounce around a little bit. There’s no question. But there’s, you know, there’s really sort of three core levers we have on that. You know?

And I’ll sort of try to keep this brief. But, you know, first is we still have a few older accounts that, you know, first came on to our past platform back in 2019 and 2020 and even 2021 when we first introduced it. They can’t align to our first generation SaaS. They have not migrated forward onto our mainline platform with that, you know, includes automatic upgrades and all those kinds of things. And that that whole infrastructure and technology stack is much lower gross margin.

So we are migrating those accounts forward onto our newest, you know, latest platform that includes automatic upgrades and the latest and greatest security, all those types of things. And but it also as they move, we end up with a client coming off of a low gross margin stack onto a high gross margin stack. So that that is a driver. We are also continuing to rearchitect the our overall platform for more and more public cloud infrastructure efficiency, and we’re making very good headway on that. I think we’ve got probably two more years of investing in that where they were we’re still dealing with, you know, pretty serious payback as we go.

You know, I I think sort of two years from now, there’s always going to be ways to continue to improve it. But I think the bulk of that progression will be complete within about two years. And then the last area is just as we continue to drive up quality and, you know, reliability and user friendliness, we continue to drive down customer care costs. You end up with less and less calls, less and less tickets coming in with customer care team. That’s another aspect of cost that goes into supporting a SaaS account, and we’re making pretty good headway on that.

If I look at the last twelve months, we’ve actually brought our our severity one and severity two tickets down by about 35 compared to a year ago. We’re continuing to drive that number down, but that is another key factor in achieving higher SaaS gross margin. So, I mean, our objective over the next sort of two or three years is actually drive it to 80%. You know, we’re we’ll see how we do on that trajectory. I know our investor deck shows a progression of 75.

We’re you know, internally, we’re shooting a little higher than that, but we think we’re we’ve got sort of these three key levers to to make that lift. Yeah. That’s great to hear. Then maybe one last one if you allow me. Your your adjusted EBITDA guidance of 8% to 9% down from 10% to 11 And just despite, obviously, the goal of margin expansion, my quick math is it’s like an extra $4,000,000 of OpEx investments.

I I just wonder where exactly are you guys spending in R and D than in marketing? If you could just, like, break down the different areas. Sure. There’s there’s two I I would lump them into two main areas. There is some additional spend in sales.

We we do continue to invest there. We brought on a a senior expert out of the hospital market to join the sales team. He’s been a senior supply team leader at a hospital network. He’s joined the sales organization as a sort of hospital supply team expert. He’s gonna be helping the entire hospital sales team.

So we we do continue to invest in sales, but but that’s probably the smallest piece of that, I would think. Mark can correct me here when I’m done. Yep. Probably, it’s a high level. But the majority is really marketing, and we’re looking to sort of get the messaging out around the end to end health care supply chain that we are, you know, not we’re hospitals, but we’re also, you know, distributors and 3PLs and manufacturers.

We have a complete end to end platform for the the whole hospital supply chain continuum, and we wanna get that message out across both North America and Europe. So we are cranking up marketing spend in that area with the interest of driving booking back up bookings growth back up to a higher level. We think we can get bookings growth back up to, you know, close to 30%. And but we think we’ve gotta get that messaging out there loud and clear. And then in, you know, the on the r and d front, there is some additional investment going into FedRAMP because we we really need we do a lot of government business, and we really need to be FedRAMP compliant.

So that has driven some extra cost. But the bulk of the extra investment in R and D is it’s just AI AI and AI. I mean, we’re we’re putting it everywhere across the product. We’ve got some some really exciting stuff coming in. That whole Texas IQ platform is sort of underlying the that effort, but we are investing across point of use, you know, the IR, OR, cath lab, you know, nursing station, the the warehouse the warehouse execution system, etcetera, right across the board to create a platform that really takes full advantage of the the excellent data that we have in our platform.

Fantastic. I

Mark Bentler, Chief Financial Officer, Texas: I think I would I would add one I would add one thing to that, Amar, I think is that, you know, we just closed up that asset acquisition in India on on May 1, as Peter mentioned earlier in the call. And that’s gonna you know, if you look if you’re looking at OpEx line of cost, that’s gonna that’s gonna add sequential cost. There was some revenue that came with that too, but it’s gonna add sequential cost into that r and d line and and also in the in the a little bit in the margin, but mostly in the r and d line.

Peter Brereton, Chief Executive Officer, Texas: Yep. And I suspect the user conference as well and some Yeah. You’ll see that come

Mark Bentler, Chief Financial Officer, Texas: through in q one. Exactly.

Peter Brereton, Chief Executive Officer, Texas: Fantastic. Thanks for the color, Mark. Best of luck. Mhmm.

Mark Bentler, Chief Financial Officer, Texas: Thank you. Your

Conference Operator: next question comes from Gavin Fairweather with Cormark. Your line is now open.

Various Analysts, Analysts, Bentham Capital Markets, Cormark, National Bank, Stifel: Oh, hey. Good morning. Thanks for taking my questions. Maybe just to start, I mean, you guys seem to be getting, more traction in the broader health care supply chain, so call it, outside the hospitals, and you’re talking about leaning in on sales marketing. Curious if you’ve done any work to size up that TAM?

And what are your thoughts about the velocity of that market in your head?

Peter Brereton, Chief Executive Officer, Texas: You’re saying the last US hospital market?

Various Analysts, Analysts, Bentham Capital Markets, Cormark, National Bank, Stifel: No. It was, like, the broader supply chain, the distributor. Like, have you have you sized up that TAM, and and what are your thoughts on on

Conference Operator: that market in the earset?

Peter Brereton, Chief Executive Officer, Texas: Well, the I mean, it’s interesting that the general I mean, what we’re seeing in the market is some really serious activity. Right? It it we’re, you know, we’re trying to tighten our focus because that market is actually so large. Right? So if I look at the general supply chain market that we’ve played in for years, when we say there’s 12,000 companies in North America, you know, with an average initial ARR of 500,000, you know, for a $6,000,000,000 TAM, that’s a very, very large market.

Our our win rate in that very large market tends to run, you know, thirty thirty ish to 40 ish percent. We have decided we would rather narrow our focus in that market to only pursue the verticals within it or sub verticals, if you will, where our win rate is over 50%. So we’re narrowing our focus to areas like, for instance, electrical. Our win rate is very high in electrical. You know, our win rate is very high in anything to do with health care.

So that can be, you know, eye care products, ear products, foot products, you know, joints and knees and medical supplies and safety supplies and, you know, and drugs. Certainly, drugs is a huge part of it. And then across all those sub verticals, have the manufacturers within those, the distributors within those, and the three deals within those. So so when we narrow to that focus, we find our win rate shoots a lot higher. We are still and we’re making that pivot, we’ve done some analysis to say how big is that TAM, and it’s still very large.

We can’t give you precise numbers yet because we’re also pulling in Europe. We’re doing business in The UK. You know, we added a nice deal in the fourth quarter over in The UK in the health care supply chain space. So we’re, you know, we’re we’re still getting a handle on what that TAM is. If I were to hazard a guess, I think it’s about a $2,000,000,000 TAM across North sort of Europe and and North America, but we’re still we’re still trying to get that nailed down.

Velocity, it’s it’s moving at a good clip. You know, there’s there’s been some tariff fears. There’s no question. There’s a lot of disturbance around tariffs. But in the meantime, you know, as I think we’ve chatted about before, the bulk of the systems these companies are running were put in in time for y two k.

So that that story is coming to its last chapter. I mean, these systems need to be replaced. So you have, you know, organizations like Gartner and others saying that this market is gonna grow at, you know, 10 to 15% a year for probably the next ten years. And it’s, you know, certainly what we’re seeing. So we’ll we will see how this goes as we make this sort of shift to a narrower focus within that very broad market, but we’re we’re pretty excited with the possibilities.

Various Analysts, Analysts, Bentham Capital Markets, Cormark, National Bank, Stifel: Very helpful. And then secondly for me, think last call, you talked about a couple additional customers going live on pharma. So just curious how those implementations went, how how the, you know, data coming out of that is is looking in terms of the ROI and and whether you think that that’ll catalyze activity in fiscal twenty six for you.

Peter Brereton, Chief Executive Officer, Texas: We certainly believe it well that the go lives are quite recent. Like, we’ve had you know, we had one that sort of did a gradual go live over over April. I guess the initial inbound was in April, and then they started some of the outbound go live in in June. We actually one of our one of the supply chain leaders was actually at our user conference, you know, pharmacy supply chain leaders was at our user conference as their organization was in the process of going through the next phase of go live, which I thought actually showed a pretty strong pretty confident. But they’ve they’ve now proceeded to the next phase.

So, like, everything’s progressing on track, but I would say it will be I would think it will be this fall by the time they have enough data to really say sort of, okay. Here’s the before picture, and here’s the after and here’s what we’re seeing, etcetera. I mean, we already have Parkview Health. He’s willing to stand up and say, yeah. But, you know, they they turned it all on over a year ago, and they’re seeing great results.

But definitely, it’s way Northwestern and, you know, St. Luke’s and others. I would think that this probably this fall by the time we’ve seen that data.

Various Analysts, Analysts, Bentham Capital Markets, Cormark, National Bank, Stifel: Very helpful. And then maybe lastly for me, for Mark. I I think last quarter, you talked about a couple decent maintenance to SaaS migrations. I think the script, you you talked about another one in health care maybe this quarter. So can you just help us frame, you know, how we should be thinking about that maintenance line going forward and and how we should think about that, maybe winding down a little bit as that as that revenue puts us off.

Mark Bentler, Chief Financial Officer, Texas: Yeah. That’s a good point. And we and we do and and we do see it. I mean, it it it came down a little bit, you know, from ’24 to ’25 as these, you know, historical migrations kinda go live on fast and and turn off, you know, on prem stuff. And there’s, you know, there’s definitely a wave of that coming.

I think you’ll see, you know, a like or or actually probably slightly higher decline in year on year maintenance and support. If you look out at ’26, you know, from ’25 to ’26 versus what happened in ’24 to ’25, which you you would kind of, you know, you would kind of expect because we’ve been, you know, selling these on prem migrations for for a number of years and we’ve sold, you know, we sold a good a good chunk of them. So, yeah, that’s that’s that’s gonna come rip on through, and and you’ll see that in ’26.

Various Analysts, Analysts, Bentham Capital Markets, Cormark, National Bank, Stifel: Thanks so much for the past

Conference Operator: one. Mhmm. Thanks, Jeff. Your next question comes from John Cho with National Bank. Your line is now open.

Hey. Good morning. Thanks for taking my question. I’m trying to

Peter Brereton, Chief Executive Officer, Texas: get an understanding of your net revenue retention. I mean, it’s still robust at a 106%, but a bit lower compared to 2023 and 2024 levels. So are we getting some normalizations following the the COVID peak?

Mark Bentler, Chief Financial Officer, Texas: Yeah. I think that We sorry. Go ahead, Mark. Yeah. I was just gonna I I think what what you’re seeing there is we’ve got, you know, the the that base of customers, that number that we disclosed there is ARR, you know, because it’s all ARR based.

You know, what we have going on in there is, you know, expansions and and migrations drive that number up, and, you know, churn drives that number, down. And what we saw happening in in the latest quarter last year in in q four of of twenty twenty four, we had a really big booking quarter. There was a lot of of expansion and migration in that in that booking quarter. And what you’re kinda seeing here is that, you know, we’re we make we do that measurement on an LTM basis. We’re no no longer picking up the large sort of outsized migration expansion in that one q four.

So it kinda dips down here as we as we normalize. But, certainly, we expect that, you know, to climb, you know, to continue to climb back up. When we look forward and look at, you know, bookings and bookings mix, we were sure expecting, you know, that our base of customers that are existing SaaS customer now customers now, you know, will will continue to to grow with us. The bookings that we reported in in q four of this year played played that out, you know, pretty nicely, you know, for for one quarter where we had, you know, a big chunk of those of those bookings in the current q four, coming from, coming from migration. So we expect that to, you know, to continue in the future expansion bookings, and and, you know, new logo bookings together will become a much bigger part of our total bookings, and and that should drive that number, we believe, back back north.

Peter Brereton, Chief Executive Officer, Texas: K. Got it. Thanks. And you have two years in a row where you report strong SaaS bookings by q four. Is that a new trend or something we should expect going forward?

Mark Bentler, Chief Financial Officer, Texas: I you know what? We it’s a good it’s a good question. As as much as we try to, you know, manage that to moderate out the lumpiness in our in our forget about our year, but even our our our quarters, it’s really it’s really it’s really tough to do. We’ve seen that historically. Q four been, you know, been a time where bookings have have peaked.

And, I mean, I think our our, you know, our the base of prospects is is pretty well trained to you know, they they know when our year ends are, and they they kind of they tend to kinda use it, as well. So, yeah, I I it’s hard to call, but I I think that is you know, we we’ve tried to break that trend, but it is kind of the trend. So I would expect that in the future. I would you know, when we think about planning, we’re certainly ramping up our bookings, you know, in the back half of our fiscal year and into q four, as opposed to in the front half of of the year.

Conference Operator: Your next question comes from Suthan Sukumar with Stifel. Your line is now open.

Mark Bentler, Chief Financial Officer, Texas: Hey, guys. This is Essay speaking on behalf of Susan. Just a few questions for me. I know you mentioned that pro services is is variable, but pro services backlog and working for strong this quarter. So I was curious to know if you can just give some additional color on on what’s driving that and what that implies for for for SaaS revenue growth.

Peter Brereton, Chief Executive Officer, Texas: Mhmm.

Mark Bentler, Chief Financial Officer, Texas: Yeah. It’s it’s a good question. I think if I could take maybe that question, the the the the back half of our bookings here for PS this year was super robust, and that’s that’s driving that ending backlog. And I think what that tells us is, you know, the market, the purse strings of our prospects in that hospital network mark market have loosened up, we we believe. And we saw that in the back half of the year with these big projects, you know, extending and and more capital flowing into, you know, from the hospital networks into our professional services projects.

So that’s great because that means projects will continue to move. They’ll move they’ll move more quickly and and customers go live. And and that’s great for us because it it just firms up the the the customer, you know, commitment to the to the to the platform. So we feel good about that. And I think, you know, in some ways, especially that happening in light of, you know, kind of the market, some geopolitical turmoil and things, I think gives us cause for optimism and and, you know, and and and hospital network budgets, you know, at least for the near term and the future.

So, you know, we feel like that’s a good a good positive sign. In terms of what that’s gonna do to professional services revenue, you know, we crossed over. We just reported this $16,000,000 professional services revenue quarter, which was, you know, bigger. We we’ve never been in the sixteenth before. In fact, we’ve been in the fifteenth before.

So, you know, we think this with this backlog, we think that we we we may not be at this sort of $16,000,000 level, you know, in the in the coming quarters, but we’re gonna be at very low we believe we’ll be at a very robust level of professional services revenue in the coming quarters on the back of that backlog. Thank you. Thank you. And maybe a follow-up for that. SaaS backlog was up 10 and it seems that there’s still elevated activity and demand here.

Could you provide maybe a quick rehash on backlog conversion and and and how we should look how we should see that how we should think about that and and how that looks like? Well, I’m are are you talking about, like, how contracts sort of convert into SaaS revenue and how that backlog converts into SaaS revenue?

Conference Operator: Yeah. Yeah.

Mark Bentler, Chief Financial Officer, Texas: So, I mean, our our typical contracts are, you know, three to five years long. So when we track our SaaS backlog, we’re we’re taking the totality of the future value of that contract. So if we sign a five year contract, the SaaS backlog is, you know, five x that SaaS ARR amount. So the revenue recognition of that, you know, Chris, is is typically recognized ratably over the over the contract period, over the five year period. That backlog itself is made up by now of, you know, a mix of many different multi multiyear contracts, all with varying sort of sort of end dates.

So that’s when you that’s why when you look in the in the footnotes, you know, look at how we, you know, actually disclose, you know, when that revenue is expected to be recognized on those on those contract commitments. You can see that in our in our notes to our, on our financial statements. So that’s that’s kind of how we disclose that backlog and and, you know, how it how it looks like it’s gonna roll out in the future. Of course, you know, every quarter, we we book more SaaS, which which, you know, increases that that RPO and and revenue recognition, of course, you know, reduces that RPO. Great.

And just one last one for me. I was curious to know what the fiscal twenty six guide is taking in terms of or or with regards to contribution from health care versus distribution. Yeah. I mean, if if you look at kind of what we’ve been seeing over the last, you know, number of quarters and even number of years, and especially as we look at our marketplace, you know, our health care market pays plays more more broadly now, I e, it’s hospital networks plus it’s, you know, it’s it’s hospital related distribution companies like, you know, like the medical equipment supplier that that that Peter referred to that we that we signed in in q four. And if you look at that that broader definition of the market, like, a a significant majority of our of our business and our growth is is coming out of that health care marketplace.

So that’s where we’re that’s where we’re focused. That’s where we’re putting, you know, more marketing energy now with this additional investment, and that’s where we expect the, you know, the the majority of our of our the significant majority of our of our bookings to come from. Perfect. Thank you. I’ll pass over the line.

Thanks.

Conference Operator: This is the operator. Your line is open, Steven.

Various Analysts, Analysts, Bentham Capital Markets, Cormark, National Bank, Stifel: Oh, hi. Thanks. Hey, guys. Peter, your comments on not seeing any slowdown in activity. So when we think of SaaS bookings for fiscal twenty twenty six, you would fully expect to see, like, good bookings growth.

Right? Like like, you would be very disappointed, let’s

Peter Brereton, Chief Executive Officer, Texas: say, if it’s flat year over year.

Mark Bentler, Chief Financial Officer, Texas: Is that correct? Yeah.

Peter Brereton, Chief Executive Officer, Texas: Yeah. I would be very disappointed. I’m not about to make a prediction, Steven, which I know is what you’re trying to draw me into, but I would agree with you a 100% that I would be very disappointed if I didn’t see booking growth in in fiscal twenty

Various Analysts, Analysts, Bentham Capital Markets, Cormark, National Bank, Stifel: Okay. Got it. And then and I might have missed it, but did did she say how many IDNs she won in q four?

Peter Brereton, Chief Executive Officer, Texas: Two. Two. Okay. Perfect. Yeah.

We added we added two we added two new IDNs in q four.

Various Analysts, Analysts, Bentham Capital Markets, Cormark, National Bank, Stifel: Got it. Thanks.

Mark Bentler, Chief Financial Officer, Texas: Thanks.

Conference Operator: There are no further questions at this time. I will now turn the call over to management for closing remarks.

Peter Brereton, Chief Executive Officer, Texas: Great. Well, thank you everyone for joining us. I’m glad to have you with us. Thanks for taking time out of your day to to be with us on the call. And as usual, if you have additional questions, please don’t hesitate to reach out to Mark or or myself, and we’ll look forward to chatting to you in September after we release our q one results.

Thanks, and have a great summer. Bye for now.

Mark Bentler, Chief Financial Officer, Texas: Thanks.

Conference Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.

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