Hello, and welcome to our Q2 Earnings Call for Fiscal 2021. I'm Bill Wood, Sylogist President and CEO.

On the call with me today is Xavier Shorter, our Chief Financial Officer. We'd like to walk you through our financial performance and material developments for Q2, which ended on March 31st.

Before we get into it, I’d like to note that this call may contain forward-looking statements relating to the future operations and profitability of the company, any of which are subject to risks, uncertainties and assumptions, and actual events or outcomes may differ materially from those we contemplate here. Any such forward-looking statements are made as of today, and except as required by law, we have no obligation to revise them.

I'd also like to direct your attention to the Q&A button at the bottom of your screens, which you can use to submit questions throughout today’s call. Following our prepared comments, Xavier and I will answer questions as time allows, and we’ll follow-up offline with answers to questions that we may not have time to get to.

For the questions, we do get to, the name of the individual posing the question and if applicable, the organization he or she represents will be announced by the call moderator. So please provide that information along with your question.

So we just made a great deal of progress in Q2. In January, we announced the hiring of Terry LoPresti, our Chief Technology and Information Officer.

We also received approval to graduate from the Venture Exchange to the TSX, where our stock was subsequently listed on March 31st, perhaps most notably on March 17th, we acquired Municipal Accounting Systems. During pre-close diligence and afterwards, we identified several opportunities to enhance MAS’s modern platform with IP and capabilities we already have in our portfolio.

Conversely, cross-sell it's highly complimentary, innovative IP across our K-12 customer community, and leverage the opportunity to sell it’s products beyond it’s current Oklahoma footprint. The acquisition is highly accretive and strategically valuable.

Simultaneously with the MAS transaction, we announced the expansion of our credit facility to $75 million, providing further resources for strategic acquisitions. We discussed these important developments on previous call, and I invite you to listen to the recording available on our website if you haven't already done so.

I'd also like to speak to some of the fundamental investments we're making to set the stage for accelerating future organic growth. Most importantly, we've been defining and implementing the alignment, staffing and strategic investment groundwork that will serve ARR retention, customer wallet share expansion and new bookings alike.

First, we made several new hires into our product management and R&D teams. These resources will give us greater insight into both voice of customer expectations and the competitive landscape and subsequently allow us to align and execute against our product roadmap most effectively.

We have also engaged offshore short-term contract resources to bulk up on development and expand QA to meet the increased development output. In parallel, we transitioned from a waterfall development methodology, where we would historically release large product updates once or twice a year to an agile methodology where we make more frequent, iterative improvements to our offerings in a monthly sprint cadence.

With these investment changes, we are in a better position to understand and respond to what customers want and raise the bar in the competitive front, providing the foundation for growth. We will also be adding sales and marketing resources to fulfil this objective.

We expect to see these investments start to pay-off towards the end of the calendar year, if not before. Not unlike many that serve the nonprofit, non-governmental, public education and public sector markets, the cumulative effect of COVID on our revenue profile was most apparent in Q2.

While our ARR retention was strong, the postponement of new bookings and additional phases of customer projects impacted both our subscription and implementation revenue. While we were celebrating the completion of a seven figure, 20 plus country implementation project in Q2 of last year for a global non-governmental organization, normal deal cadence has been delayed due to the COVID that would have normally replaced or exceeded that revenue on a year over year basis, however, we are seeing pipeline discussions pick back up.

And I look forward to updating you on the positive impact, successful deal matriculation will have on our revenue profile in the coming months. I'd like to now turn things over to Xavier to take us through the financials in more detail.

Thanks, Bill. I'm Xavier Shorter, Sylogist’s Chief Financial Officer.

As Bill mentioned, we have made quite a bit of progress this quarter. From a financial perspective, we faced two headwinds; currency and COVID, which were mainly responsible for a 6% decline in our quarter over quarter revenue from $9.4 million to $8.9 million, up to 6% reduction, 4% or slightly under $400,000 was directly attributable to the weakening US dollar.

Three quarters of our revenue is denominated in USD. So as the dollar fell from an average of CAD 1.34, in Q2 last year to CAD 1.27, in Q2 this year, our top line fell accordingly.

The remaining revenue decrease was due to professional services. As Bill highlighted, last year's Q2 included a large multiyear professional service project, which constituted approximately $780,000 in that quarter alone.

Large projects are lumpy by nature and someone unpredictable and there's currently no ongoing project of comparable size due to the COVID delays, Bill mentioned. Many of our nonprofit and NGO customers are either directly involved in the pandemic response or trading cautiously due to a generally uncertain, financially pressured environment they are facing and in turn have been hesitant to begin major implementations.

However, we're confident this revenue has been delayed, not lost. Our sales pipeline remains strong and we expect to see the man recover as vaccinations become more widely available and things return to normal.

Adjusted EBITDA in Q2 was $4.4 million down $0.56 million in Q2, 2020. The main reason for this decrease was revenue decline caused by unfavorable foreign exchange rates and lower professional services, I already detailed.

Expenses were also somewhat higher. Much of the expense increase came from our move to the TSX from which we incurred higher professional fees and compliance costs.

We also made a material $100,000 charitable donation that we felt was a socially responsible gesture. As you know, we do not issue guidance.

However, I should make clear that the strategic investments Bill discussed earlier may lead to compress more EBITDA margins as we expand our product, R&D, and sales teams. Our objective is to add the right capabilities to drive healthy and profitable expansion.

As always, we will be guided by shareholders' interests, seeking to produce both steady organic growth and strong margins, while recognizing that there is to some extent a tradeoff between the two. Our gross profit margins for the quarter were 71% compared to 75% in Q2 last year.

This is due mainly to the acquisition of InfoStrat relatively service-oriented business in April 2020. With its historically lower margins, InfoStrat contributed $824,000 of professional services revenue in this quarter.

Operating expenses were up somewhat in Q2 2021 relative to the prior quarter, due to the factors I mentioned. Although R&D expenses were down, this solely reflects the team's work on projects that were more appropriately capitalized and expensed.

This is not an economic change, but rather based on accounting guidance, simply more projects qualify for capitalization. As Bill mentioned, we are ramping up strategic R&D investments.

In total, profit for Q2 was $1.1 million, down from $2.8 million in the same period in the prior year. Earnings per share were $0.05 a share, down from $0.12 a share.

Return to investors remained strong. We distributed $3 million in dividends to shareholders, up from $2.4 million the same period last year and repurchase 576,000 of common shares or 50,000 shares at an average price of $11.52.

Quarterly dividends remain at $0.125 per share, and our normal course issuer bid remains in effect. Our balance sheet continues to be strong.

At the end of Q2, we had $22.2 million in cash, plus $56 million of headroom in our credit facility. In conclusion, I'd like to highlight that we are more excited than ever about Sylogist's future.

Bill has brought clarity and focus to our go-forward strategy, and we're already executing on it. The company is in a strong position to grow both organically and through continued M&A and we are making the strategic investments to do so.

Thank you for your time and interest in Sylogist. Bill and I will now take a few questions.

Thanks, Xavier. Our first few questions are from Jim Byrne of Acumen Capital.

So, first, Jim asks, how's the mass integration going? And whether we plan to utilize some of their products in our portfolio?

Hi, Jim, thanks for that question. The mass integration is going very well.

Different than in the past where the acquisitions had been done through different methodology relative to how the IP, the team alignment, and systems alignment was done. I brought with me a methodology I'd use that other companies to be able to systematically and from a repeatable standpoint and measurable standpoint, look at the mass integration from an organization wide standpoint, our organization and leads interacting with theirs.

That methodology is going -- is working well, for us. It's giving us visibility into the amount of effort that's involved.

But most importantly, we know their business quite well, through the diligence and the markets they serve and the IP that they have. And so to that end, we are well along with the integration, we expect that largely to be completed by the end of June, early July.

Thanks Bill. Second question from Jim is how is Sylogist’s appetite for further M&A?

And how does pipeline look?

The appetite is strong for and through the lens, as I've mentioned on several calls up to this point. We're looking for companies that are a good fit for us.

And a good fit can be qualified to a number of different tick boxes. But to the extent that there's opportunities out there, our tracker is in excess of 100 that we are following, we actually just added an additional resource to that team.

And he will be continuing to put more effort into outbound connections and research on those opportunities to keep them as fresh and engaged as possible. So the pipeline is very strong, the appetite is strong and our resources to be able to execute on those, once we identify and engage, is strong.

So we're in a very good position in a very positive position as we look forward.

Thank you. Third question from Jim.

The US economy is opening quickly. Are we seeing that from clients, and are clients willing to have the kind of conversations that a few months ago they wouldn't have?

Yes. As I mentioned in the prepared comments, we are seeing activity in our deal pipeline.

Those discussions start to reoccur and come -- become more fulsome in terms of, not just concept, but really now timing and some of the details related to the final decisions that they're down to. And so to that end, the US economy, yes, I think, many of the charities are starting to feel a little bit better.

But I do want to caution everyone, being in this industry now for 30 years, the charitable and NPO community, NGO community are often first impacted and last out. Philanthropy has been extraordinarily strong in US and North America for charities overall.

I did see recently that internet giving to charity was up almost 32% in the past, so people are reaching into their pockets and supporting them. And that is ultimately helping us to now get customers in position and prospective customers in position where they're ready to pull the trigger and get out of some of their hunker down states that they've been managing through.

Thanks, Bill. And final questions from Jim.

Do we anticipate some stronger growth in the near term and what’s that mean for margins?

Yes. This is Xavier.

Thanks, Jim. Yes.

So we are, as Bill pointed out, seeing more of the NGO, NPOs coming back to the table and having discussions about finalizing deals. We expect though that, given where we are that -- in negotiations and so on and so forth, we are probably not going to hit the ground running with billable time until perhaps Q4 of our fiscal year.

And as far as margins go, as we start to execute, which we have, continued to execute on those strategic investments. It will have -- it will compress our margins as we gear for rapid growth.

Thank you, Xavier. That's actually it for the questions have come in today.

So, thank you to everyone who attended this call. Appreciate your time.

If you have further questions, please feel free to follow up and we can answer them offline. Thank you.