Tecsys Inc.

Thank you. Good morning, everyone.

Joining me today is Mark Bentler, our Chief Financial Officer. We appreciate you joining us for today's call.

For those that may be new to our story, Tecsys brings transformative supply chain solutions that resolve complex challenges for commercial distribution networks to customers around the world. Our markets include healthcare and pharmacy, e-commerce, retail, and direct-to-consumer brands, as well as general and converging distribution markets.

We're the market leader in North America for health systems and hospital supply chain solutions with an end-to-end value proposition. I'd like to begin by summarizing key themes over the second quarter of fiscal '22, and then the results of operations.

Mark will then walk us through the financial results in more detail. And finally, I'll comment on our outlook followed by a Q&A session.

There are 2 key indicators I'd like to highlight, which despite currency headwinds are contributing to our track record of solid accelerated growth revenue, where I just like to touch briefly on growth and quality, and our pipeline, where I'll touch on market conditions. First, this is our 11th straight quarter of record revenue.

As we continue to emphasize, SaaS revenue is scaling up relatively quickly due to our ongoing strategic shift to SaaS in all our markets. As we continue to mature, the SaaS revenue model, we will increasingly create greater revenue visibility and improved the long-term quality of our revenue.

This leads to my second point, our pipeline. As we report results into the second year of the pandemic, while our revenue performance continues to move in a positive direction, this only tells part of the story.

And I'd like to reiterate the growing importance of supply changes as a strategic lever within organizations and how this has been reflected in our pipeline. Supply chains everywhere are in flux due to the pandemic and are strained due to the general e-fulfillment trends and shifting trade agreements.

Everywhere we look, in all sectors, companies are attempting to bolster technology to become nimbler in the face of new uncertainties. And we are seeing the effect of that trend.

In August, we announced that since COVID disruption began, over 30 healthcare accounts have made major investments with Texas, helping to resolve operational shortcomings exposed by the pandemic. In September, we shared the news of the Australian retail chain and Woolworths holding subsidiary politics, having leveraged Tecsys software to manage the complex back-end supply chain processes behind their sales force technology.

In both cases, we're seeing signs that organizations are investing in their supply chain agility, and Tecsys solutions are the chosen vehicle for that agility. As a result, we're seeing momentum in our pipeline in all lines of business from both new and current customers.

Some global customers, who may have started with a single facility, are now expanding to multiple jurisdictions. And others, who may have started with a few modules, are now expanding their Tecsys footprint to better equip their supply chains.

Our Q2 bookings demonstrates that the impact of the bottlenecks that we were seeing in procurement and legal, seems to be abating, and we seem to be returning to a normal deal flow. Our momentum is strong and while continuing to invest in the expansion of our own services organization, we're also investing in the expansion of our partner ecosystem.

This is beginning to truly help us to respond to increased demand and proactively hedge against growth-oriented labor and delivery capacity bottlenecks. Mark will now provide you further details on our financial results for the second quarter and the first half of our fiscal year.

Over to you, Mark.

Thanks, Peter. We're pleased with our strong performance in our second quarter, ended October 31st, 2021.

Before jumping into Q2 and first-half results, as a reminder, last quarter, we began showing SaaS revenue, separately from other recurring revenue, namely maintenance and support. We're also presenting license revenue as a separate line, including proprietary and third-party licenses in that revenue line.

Representing hardware on the separate line and this line likewise includes both proprietary and third-party hardware. And finally, we've combined reimbursable expense revenue with our professional services revenue line.

We made these changes in order to highlight the areas of the business that are driving our performance and to create greater clarity in the underlying trends in our business. With that, I'll move on to the second quarter results.

Total revenue was a record $34.3 million, 12% higher than $30.7 million reported for Q2 2021. And as Peter mentioned, our 11th straight quarter of record revenue.

As many of you know, a significant portion of our revenue, about 65% to 70% is denominated in U.S. dollars.

As a result, movement in currency exchange rates has an impact on our reported revenue and growth. During Q2 fiscal 2022 currency exchange movements negatively impacted our reported revenue as the value of the U.S.

dollar was weaker compared to the same quarter last year. In fact, on a constant-currency basis using fiscal 2022 currency rates, our second quarter revenue grew by about 18% compared to the same quarter last year.

This unfavorable currency movement materially impacted all revenue lines in the quarter. We continue to experience strong and diverse revenue streams underpinned by a 28% increase in SaaS revenue, up from $5.1 million in Q2 last year to $6.6 million in Q2 of 2022.

On a constant-currency basis, SaaS revenue was up about 36%. I also want to note that we're at the precipice of a significant milestone in our transition as a SaaS business.

With our SaaS revenue representing 44% of our total recurring revenue streams in Q2 of fiscal 2022, and we have a line of sight to SaaS crossing over the 50% threshold. It is particularly notable that we've reached this point quite quickly; in fact, about 3 years into our SaaS transition.

Maintenance and support revenue for the 3 months ended October 31st, 2021, was $8.2 million, down 1% compared to the same quarter last year. This decrease was a result of the negative impact of currency movements on a constant-currency basis, maintenance and support revenue actually increased by about 4% compared to Q2 last year.

Our annual recurring revenue at October 31st, 2021, was $56.9 million, up 12% from $50.9 million at October 31, 2020. On a constant currency basis, that increase was about 18%.

Professional services revenue for the second quarter was $13.1 million. That's up 11% from $11.8 million reported for the same quarter last year.

Again, currency movements created a headwind on revenue growth here, which would have been 17% on a constant currency basis. Hardware revenue in Q2 fiscal 2022 was $5.4 million.

That's an increase of $2 million compared to the same period last year. And this was driven by solid backlog heading into the current fiscal year.

SaaS bookings are reported on an annual recurring revenue basis and increased by 50% to $4 million in Q2 2022, compared to Q2 of last year, which was $2.7 million. SaaS bookings were highlighted by a new customer signing in all our key verticals, with 3 new hospital networks, 4 new debt general distribution retail customers, and some solid base business uptake as well.

Professional services bookings were healthy at $17.9 million, comparing favorably to $11.5 million in the same quarter last year. License bookings were $1 million in the quarter compared to $1.9 million in the same quarter last year.

SaaS remaining performance obligation, also known as RPO or SaaS backlog, was $72.7 million at the end of Q2 fiscal 2022. That's up 21% from $60.2 million at the same time last year.

On a constant-currency basis, that growth was 28%. 28%.

This notable increase was driven by significant multi-year SaaS bookings in the quarter. Professional services backlog at the end of Q2 fiscal 2022 was $33.1 million, that's down about 16% compared to $38.7 million at the same time last year, and down slightly from $35.1 million in July 31st, 2021.

Our professional services backlog remains robust, and we expect our delivery team to continue to be very busy in the quarters ahead. For the second quarter, total gross profit was $15.5 million, that's down about $0.5 million compared to $16 million in Q2 2021.

As a percentage of revenue, gross margin was 45% compared to 52% the same quarter last year. The decline was a result of unfavorable exchange movements, investments to support growth, and also change in revenue mix; the latter in particular with lower license revenue and higher hardware revenue.

Switching now to our expenses for the second quarter, operating expenses increased to $13.9 million. That's higher by $1.3 million or 11% compared to $12.6 million in Q2 of fiscal 2021.

Operating expenses increased as we expanded investment in sales and marketing, as well as in research and development. Net profit for the quarter was $700,000 on $0.05 earnings per basic and fully diluted share, compared to $2.1 million in Q2 last year, which was $0.14 per basic and fully diluted share.

Adjusted EBITDA was $3.2 million in Q2 2022, compared to $4.8 million Q2 last year. The decrease in profit and adjusted EBITDA compared to the second quarter last year was driven by an unfavorable foreign exchange impact of approximately $1.5 million, as well as lower license contribution and higher expenses.

Turning now, briefly to our results for the first-half of fiscal 2022, our total revenue was $67.5 million. That's up 15%, compared to $58.8 million in the first-half of last year.

That would be up 21% on a constant-currency basis. SaaS revenue for the first half of 2022 was $12.2 million.

That's up 36%, from $9.0 million, in the same period last year. And that's up 45% on a constant-currency basis.

Our profit for the first-half of fiscal 2022 was $1 million or $0.07 per basic and $0.06 per fully diluted share compared to $3.3 million or $0.23 per basic and fully diluted share in the same period last year. Adjusted EBITDA was $5.7 million in the first 6 months of the current fiscal, compared to $8.3 million for the same period last year.

Foreign exchange movements had a negative impact of approximately $3 million on profit and adjusted EBITDA in the current 6-month period compared to the same period last year. Finally, we ended the second quarter with a strong balance sheet position.

At October 31st, 2021, we had cash and cash equivalents and short-term investments of $38.1 million that compares to $45.9 million at the end of the year. And we had debt of $9 million compared to $9.6 million at the end of the year.

Cash provided by operations was $600,000 in Q2 and our DSOs, or days sales outstanding, and accounts receivable remains solid at 56 versus 47 at year-end, and compared to 73 at the same time last year. With that, I'll turn the call back over to Peter to provide some outlook comments.

Thanks, Mark. The positive growth trends we saw in fiscal 2021 are continuing into fiscal 2022.

Not only are we reporting record financial performance, but it's encouraging to see the uptick in new accounts, expansion of existing accounts, and the overall strength of our pipeline. The market conditions give us confidence that we are well positioned to continue capitalizing on our market opportunity.

I'd also like to take this opportunity to thank the TSX for including us in the TSX30. That was exciting news for us, and I'd like to thank our shareholders and our employees for making this possible.

In case you didn't see that release,

in September Tecsys was included in the TSX30 with a 3-year dividend adjusted share price appreciation of 181%. As an indicator of future performance, we can look at the strength and depth of our current pipeline.

We're seeing solid opportunity cycles and great activity across all segments, both among current customers and new prospects. We are mindful of our delivery capacity, and we continue to invest on that front.

We are also continuing to intensify our channel relationships. In both cases, we're taking proactive steps to manage for continued growth.

As we entered the second half of fiscal 2022, we continue to feel confident that the remainder of '22 is on a solid growth trajectory underscored by positive trends in our KPIs. While COVID may still present additional curve balls, Tecsys has never been in a stronger financial position to weather future sudden market volatility, if it were to occur.

In summary, I want to remind analysts and investors about our 3 key operational themes for the remainder of fiscal 2022, which have not changed from our previous analyst call as we entered the fiscal year. First, we'll continue to maintain a focus on developing and growing our SaaS revenue model.

We will likewise continue to optimize our internal processes and resources to complement the shift to SaaS to maintain high levels of customer satisfaction as well as improved margins. Secondly, we will continue to expand our partnership ecosystem.

This is key for us to scale rapidly into the market opportunities that I mentioned earlier. We now have partners working effectively with us in both North America and Europe.

We'll continue to invest so that we can enable them more quickly. From accelerated training programs to improve on-boarding tools, we are determined to make our SI partners very successful.

Thirdly, we plan on investing in all of our sales channels to exploit the momentum in opportunities coming at us. We also continue to expand and refine our omni -channel business platforms to service evolving needs in the healthcare supply chain, converging distribution and retail market segments.

These efforts will help us to not only minimize customer churn, which is already very low, but will also help us to expand revenue from current clients as we saw it happening again this quarter. Remember, change is what drives our business.

And the lasting effect of the COVID-19 pandemic on supply chains has accelerated the monumental change that was already underway and continues to turn traditional supply chain on its head. With that, we will open the call up for questions.

Thank you.

Peter, Mark, good morning and congrats on another strong quarter.

Thanks.

Thanks, Amr.

My first question -- yes. My first question is, on the new restrictions we're starting to see in different jurisdictions with the new virus strain.

Do you see that impacting, you guys at all, be it on the delivery front or bookings?

Hard to say where, we came through the early and much more surprising and drastic phase of the pandemic relatively unscathed. We did see a slowdown in bookings, of course, for a few quarters there.

So, it hard to predict, we're watching this overcrowded one to see how serious it turns it to be. We certainly learned how to navigate around travel restrictions.

I think from a -- we're doing a fraction of the travel that we used to. You can see that actually even in our reported numbers.

I mean, the travel costs are down substantially, so we don't anticipate a major hit there. But I think the whole world is trying to figure out what the next 2 weeks looks like, and I guess it could have some impact certainly.

But, so far, we've come through quite a number of months of pretty severe pandemic and have learned how to get business done in spite of it.

That's great. Maybe, Peter, you can give us an update on your capital deployment strategy.

My sense from the last couple of calls is you're squarely focused on the organic side. Has that evolved at all?

Are you seeing valuation levels that are more conducive to M&A?

Yeah, we continue to look for the right opportunities to buy footprint in Europe, so that search continues. I would say, that as time has gone on and valuations have somewhat stabilized, it certainly looks like there may be some possibilities there, so we're continuing to scratch at that.

The other area we continue to look is in the U.S. area for potential, small niche healthcare components that could complement our suite.

So, we continue to look at both, Briley continues to build a pipeline for both. But certainly, at this point, I would agree with your assessment.

Our focus and the focus of our management team is on growth. The business at our current growth rates doubles every few years and that creates a lot of focus to make that or demands a lot of focus to make that happen.

So, the focus is still clearly on the organic side.

Fantastic. Maybe, one last one for me.

Can you give us an update on your revenue splits between your different verticals?

I'll let Mark take that one.

Yeah. Sure.

So, the -- our split is pretty similar to what it was last quarter. And only about 35% Healthcare and about 65% complex distribution.

Great. Thanks.

I'll pass the line. And congrats, again.

Thanks.

Hey, good morning. I thought I'd start out on the IDN that you added in Q2.

Nice to see Kinect 3 new logos coming on board. Maybe you can just discuss the profile of some of the new customers in terms of their size and whether they're thinking end-to-end out of the gate or starting with point-of-use or CSE.

Yeah, we actually had the full variety. Size-wise, these are all sort of medium-sized IDNs.

They're part of the 300 IDNs that we target in the upper end of the market, so they're all good - size d networks. In terms of what they're purchasing, it literally ranges from one starting with the CSC and the other starting -- I believe the other two of [Indiscernible] are starting on the point-of-view side.

But in every case, the intention is to go full end-to-end, but starting in a couple of segments of their businesses. So, they were all pretty -- what we would see a sort of good average - size IDNs, as you know, given our average - size footprint or average-size deal has moved up pretty significantly in the last few years, and these ones fit right into the current average.

That's great and then maybe just a couple on the field. I guess now, you have the through that be in terms of the audience that you're working with in below 50s, have your 100 targets by fiscal 2025.

I know that given that you have longer sales cycles. I guess I'm curious how many of you might have visibility on that before thinking through supply chain implementations over the next years?

Yeah. We -- you never know exactly, there's changes that happen in these businesses.

Sometimes there's changes on Boards of Directors that suddenly changed focus or change of CEO that suddenly changes focus. But from what we can see we believe we know where -- we have the names of what we think are the next 20 that we expect to come in over the next year and half or so.

So, we'll see how that plays out. But certainly, this market is accelerating as we anticipated.

I mean, it's slow -- it was starting to accelerate, the pandemic hit it slowed down for a bit. It's back to a decent clip.

I mean, here we are still in pandemic really, and yet in the first 6 months of the fiscal year, we've already signed 5 new networks. So, it's -- we love the momentum that's building there.

And certainly, we think we know the names of the next 20 that will be joining us.

That's such great color. And then, I guess I'm curious, how much interest are you seeing on SaaS migration out of the base?

We've talked about it in the past, and you've gotten the odd one, kind of here and there, but are you seeing increase appetite from the on-premise install base?

We are. And probably in some ways a little bit more than we anticipated.

So, we'll see how that unfolds. Our focus has been on new accounts and to driving the new accounts as business first, feeling that our existing account base was quite happy to continue to run their existing software on prem and just upgrade from time-to-time and so on.

But there's a lot of directives there and a lot of companies are looking at, with some of the ransomware issues happening and so on, are saying, hey, how fast can I get this stuff off my servers and into the public cloud and better protected and so on? So, we're seeing an uptick in interest in that.

And you're seeing it in the further dropping license fees. The license fees, this last quarter, down to a $1 million.

I mean, Q2 is typically a fairly strong booking quarter for us. So, to have the license fees down another 50% from Q2 last year, it kind of tells that story.

I mean, the last year-and-a-half or so, the license fees have largely come from the base. And the base is starting to shift to -- into SaaS conversions as their path forward.

So, we think you'll continue to see license fees driving closer and closer to 0 and the SaaS bookings replacing that as they start to move?

That's great. And maybe one for Mark.

The services gross margins, I guess first half of your fiscal year moved a little bit lower than where you were running over the course of fiscal 2021. Can you maybe disaggregate that into some underlying trends at play between building capacity for further proserve delivery versus FX versus the SaaS optimization that you guys are working on in the background?

Yes, on the services side, that's really a combination of those two factors. One is -- and it's kind of -- they're kind of impacting in equal parts.

It's the FX impact on the mismatch we have on the revenue side and USD and the cost side, and in CAD that's putting some pressure on the comp. And then the other thing, and it's like I said, it's about roughly kind of a half and half impact.

The other part of that is scaling up the business for growth and investment and delivery capacity.

And just on that last point. The last couple of quarters, you've been delivering around $13 million a quarter in services.

Obviously, a big services bookings number this quarter, do you feel like you have the delivery capacity to be delivering maybe $14 million, $15 million, $16 million in services in the quarter or is that kind of where we're going to be heading into next few quarters?

I would say in the next few quarters, yes, that's what we're -- from what we're seeing in the trends we're seeing, that's kind of where we're expecting this to go. We're growing headcount in services.

You'll recognize that last year we grew and grew that team pretty significantly. The beginning part of this year, we've continued to grow that team, although at a slightly slower pace.

And that's not because necessarily we wanted to grow it more slowly, but it is a pretty competitive a pretty competitive hiring environment that we're seeing now over the last -- really over the last couple of quarters. So, we continue to recruit there and continue to build team to support what we expect to be continued increase in demand and services.

Awesome. Thanks so much, I'll pass it on.

Can you just speak to maybe the progress and conversations you're having when it comes to your pharma solution and you’re existing IDN -based, maybe conversations you might have with the new IDNs. Obviously, you talked about having visibility on 20 over the next year and a half, maybe what conversations are looking like on pharma, both with existing and potential new customers on the IDN side?

Yes, it continues to be a relatively small portion. A lot of pharmacy in the hospital space is still in a very traditional mindset.

So, we still see overall, I would say, pharmacy is maybe 10% of the conversations that are happening with the networks right now. We're actually fine with that.

We think over the next couple of years, we'll probably add a couple of more pharmacy implementations. As we look at this over the 5-year to 10-year horizon, we're expecting 80% to 90% of our bookings to come from the areas where we're already well-established in CSD, CAT Lab, OR, nursing station delivery, etc., with 10% to 20% coming from the pharmacy side.

Our expectation though is as you get into years 4 and 5, pharmacy starts to become more significant. So that's what we're working towards.

We're continuing to invest in that. We're looking to produce -- we're still looking to produce some documentation showing what the savings are that drives.

There's also -- we also need to continue to build up some of our own pharmacy expertise, so we're working on that as well.

And then you spoke earlier about the importance of the partner ecosystem. Can you maybe talk to -- are you having conversations at present to keep on adding to that, and if so, any of those conversations of couple of mergers when it comes to SI engaging with.

And then, just if you can highlight maybe partner contributions in the quarter, specifically on the IDN and maybe if they played [Indiscernible].

In terms of conversations with SIs, I mean, those continue. The funding is, of course, the entire tech community is challenged with workload right now.

So, they've -- by and large, the SIs are not looking to create brand new partnerships. But what they are looking to do is satisfy their existing clients.

And when their existing clients develop a need. They end up looking around the marketplace to figure out who to work with for that particular need.

So, we are seeing that most actively in healthcare. This past quarter, I don't honestly remember it was either 1 or 2 of them, I'm mixing it up with first quarter in my mind here, but out of the 5 we've signed so far this year, 2 of them were brought to us by partners.

And that's obviously a significant factor in continuing to expand our market presence. The beauty, of course, then as those partners remain involved to assist with the implementation.

Particularly, a lot of the client-side work around project management and in some cases, interface work and testing, and so on. So that is going very well.

On the general distribution side, we continue to look for more boutiques. I mean, in some ways we have our greatest success in the general distribution space with sort of smaller boutiques that focus very much on supply chain and often end up with 15 or 20 clients of their own that they work with extensively over a period of time to implement various solutions.

And we've got a couple of those now, but our -- Jamie O'Halloran, who heads up our partner initiatives, that's something that he's working on quite extensively. He is building it back that particular piece of the ecosystem.

When we look at the next 3 or 4, 5 years, we can see that the whole general distribution space is beginning to go into a technology renewal phase replacing these 20-year-old systems that we've put in for Y2K. And in many cases, they rely on consultants that they know to guide them as to which system to look at.

So, building out our presence in that ecosystem is critically important to being part of the play for these new accounts. Pipeline - wise.

Right now, we're currently at about 25% of our pipeline, is what we consider the partner influenced.

Okay. And then maybe just one last one from me.

Obviously, 3 IDN wins this that required probably towards the top end of what you guys done. Is that 3 IDN bridges, is that because of some of those legal bottlenecks installed last quarter.

So maybe a month into the quarter or are you starting to see that snowball effect and will that really, really be accelerating sales cycle on the healthcare side, improving and it's still maybe potent on the safe side. And I think last quarter you suggested that you've got to grow above your debt as big as you originally thought to go after [Indiscernible] 100 IDN s in the next 3 years to 4 years.

Do you still stand by that given the performance discipline?

Yeah, the rate at which we're signing new IDNs, first of all, is I think there is a little bit of a catch-up to tap in there as we got through some of those procured bottlenecks. At the same time, when I look at the pipeline, the pipeline is extremely active and there's a greater number of opportunities in the short-term pipeline than frankly you've ever seen.

So -- I don't -- it's hard to say, I mean, as you know, our bookings tend to be a bit lumpy, but certainly at this point, it feels like we're back to a run rate of, if I take for instance, in the first half of the year we closed 5 in the first half of the year. Can we do 5 in the second half of the year?

From what I can see in the pipeline, it certainly looks like we can. So, I think we're -- that's a fairly normal run-rate at this point.

Contributing factor, the whole market is moving more quickly. There's a lot more focus at a Board-level throughout, not only the hospital market, the general business market, but specifically within hospitals, that supply chain and supply chain management is certainly a Board-level issue coming out of the pandemic.

So that -- I think that's putting some heat under it. And then add to that the fact that our healthcare sales team is twice the size that it's been even a year-and-a-half ago.

So, we've grown that sales team substantially, which in turn, means, of course, we're involved in many more conversations that in turn drive more opportunities to a close. So, I think it's a combination, it's the market, it's the clearing of procurement bottlenecks, and it's the fact that our sales team is twice the size it was a year-and-a-half ago.

In terms of your last question, we're continuing to look at that in terms of how fast we grow that team. We still think ultimately to get to a point where you've got no more than 10 accounts per rep, probably makes sense, but we're continuing to watch that and we're going to let this initial investment in healthcare sort of mature for a bit on the sale side, although we will probably accelerate the sales team growth a little more on the converging distribution side, as we're seeing that market opportunity also heating up.

And I would just add to that that we with the pretty significant investment that we've made in the sales team up until this point of time, we are starting to see the productivity starting to improve with these folks that have been around now for a number of quarters, have had time to weigh into the markets and know the product, know the way forward, and have had time to start doing some selling. And we're starting to see the productivity impacts of that existing sales team, but we also believe that that there's more productivity to come here.

We've come on the front end of that improvement.

Okay. Thanks.

Thank you, guys. So, I just want to touch on the free cash flow generation for the first half.

I know as we return into positive, actually, cash flow operations turned positive this quarter, but still a bit underwhelming. Could you please touch on that, give us some more color as to what's going on in the pie graph.

Sure. Yes.

We expect positive cash flow from operations. We do have some seasonality in our cash flows, which tend to make Q1 our low point, and Q4 our high point.

So that's pretty normative for us. In the short term, our expectation is to continue to invest, to grow the business, but to remain profitable.

So that operating cash flow positive operating cash flow at some level is our expectation, but we're not right now looking to drive that number up. We're looking to invest in the business to capture what we believe is very significant growth opportunity.

We do -- as you would have seen, we just declared a dividend of $0.07 a share that's going to be paid in January. And that falls a pretty long trend of paying our dividends, which internally expect to continue in general.

And then finally, in terms of CapEx. If you look at CapEx, we spend less than 2% of our revenue here.

And that's what we expect or we'd see in the near-term I think as the business scales up over time. We're not a capital-intensive type of business.

So, I think that that number as a percentage of revenue eventually goes down over time, but that's kind of the picture.

Got it. Thank you, I'll pass the line.

Hey, good morning, guys. I just have a question on hardware revenue growth.

I know on a year-over-year basis it's quite strong, but if it's compared to last quarter, it gets a little bit -- is that just seasonality or is it because of the issues by your hardware providers? And also, did you see any challenges sourcing the hardware in the past quarter?

Yeah, John. That question --

Hey, John.

Is on hardware revenue?

Sorry. It's on the hardware revenue.

Yes.

Yeah. Right.

Yeah. That's a pretty lumpy one for us, John.

And I think it was -- it sorts of ticked down a little bit, but it's still been a pretty robust for us, historically. There are still pretty robust levels of hardware going on here and those deliveries are happening where we continue to book a reasonable amount of hardware.

We had a pretty big backlog coming into the year. What -- kind of where is the future you look like there, and we still have very significant hardware backlog.

We are, on the other hand, we're starting to see the impacts of -- well, not starting to see, but we're dealing with some supply chain issues in some areas of our hardware delivery business. So that can have an impact on short-term volatility on delivery timing and things like that.

But these kind of hardware levels that we've seen in the last couple of quarters, we've got backlog to support the continuation of that kind of level in general for the next quarter or two.

Okay. Thanks.

And my other question is on the investments in your growth initiatives. I think is now almost been 2 quarters since sales investments were started.

Now, if you look back, how would you summarize the return of the investment both so far or is it still too early to tell?

Are you referring to investment in sales and marketing or were you referring more sort of across-the-board investments and growth?

In the sales and marketing.

Sales and marketing? Yes.

I mean, if you look at bookings this past quarter, we booked $4 million of SaaS plus the millions of licenses. In currency adjusted terms, that was actually a second highest SaaS booking quarter ever.

And in currency just in terms of -- it was actually the highest SaaS booking quarter ever. So, we feel like we're -- the investment is paying off.

We invested in marketing early and then brought on the investment in the sales team to take advantage of the additional lead gen and demand gen created by the marketing push, and we feel like it's paying off. I mean, we're not only seeing the rise in bookings in this most recent quarter, but as I mentioned earlier, we are seeing a very strong pipeline and we're pleased to see that the new account members that have joined the team in the last 12 to 18 months, they are on the board and contributing deals.

I mean, to me that's always one of the questions. We've been in this business for a long time, and when you grow the sales team, you always have to ask yourself, are you just spreading the same results over more people or are you actually getting more results?

But from what we're seeing, it's actually driving more results, the pipeline is moving more quickly. And the new guys are getting on the word.

Meanwhile, the existing team is continuing to contribute. So, I mean, I think it's kind of an interesting time period we're coming into now.

Is it looks as though our base accounts are beginning to migrate to SaaS? New accounts are joining us and the size of the new accounts is set that every new account that joins us now brings with it substantial expansion opportunities, which for those of you that have followed us for a while, you would know that on the general distribution side, that didn't use to be the case.

Typically, that we were dealing with smaller companies and once you had sold them, you were -- it was one and done. But that's no longer the case.

The typical accounts we're signing now across the different markets are all much more substantial with the expansion opportunities inside them post initial deal. So, it certainly looks like it's paying off.

We're pretty pleased with how it's going. Our investment from here, we are continuing to invest more in building our Cloud team and Cloud capabilities.

That's putting some weight on some of the Cloud margins in the short-term. But the Cloud revenues, the SaaS revenues are scaling up so quickly.

We think that'll normalize in pretty soon.

Thanks, I'll pass the line.

Thank you. So that concludes the question-and-answer session.

And thank you for taking the time to join us on today's call. As always, if you have any additional questions, please don't hesitate to give myself or Mark the call.

And goodbye for now and we'll look forward to talking to you again next quarter. Thanks.

Thanks.