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spk00: Thank you for standing by. This is the conference operator. Welcome to the MDF Commerce Q4 Fiscal 2023 Financial Results Investor Conference Call. Today's call will provide information and commentary on the company with a focus on the financial results released yesterday after the markets closed. We will hear from Luke Filiatro, President and Chief Executive Officer, and Deborah Dumlin, Chief Financial Officer. If you have any questions following the call, you can reach MDF Commerce at the address on their website, www.mdfcommerce.com. First, here are a couple of housekeeping notices. All participants are in listen-only mode for the duration of the call. This call is being recorded and we expect that the recording will be available on the MDF Commerce website later today. The information in today's remarks, including any forward-looking statements, have been prepared as of March 31, 2023, unless otherwise indicated. MDF Commerce assumes no obligation to update or revise the forward-looking statements to reflect any new events or circumstances, except as may be required pursuant to securities law. We remind you that today's remarks will include forward-looking statements and non-IFRS measurements that are subject to important risks and uncertainties. For more information on these risks and uncertainties, please see the reader advisory at the bottom of the MDF Commerce news release, which is on the website and has been filed on www.cedar.com. The company's actual performance could differ materially from these statements. I will now hand the call over to Mr. Filiatro. Please go ahead, sir.
spk02: Well, thank you, Rocco, and good morning, everyone. Thank you for joining us for our Q4 Fiscal 2023 Financial Results Call. Before turning to the financial results that we filed after the markets closed yesterday, I would like to provide an operational update. MDF Commerce is a developer and operator of digital commerce platforms that facilitate billions of dollars per year of digital commerce transactions for well over 550,000 end-user companies, mostly in North America. Our mission is to enable the flow of commerce. I'll present an overview of the company's performance and outlook for the future, beginning with a fiscal 2023 financial highlight. Fiscal 2023 revenues reached 128.3 million, a substantial increase of 20 million or 18.5% compared to fiscal 22. We achieved positive adjusted EBITDA of 3.4 million in fiscal 23. a significant improvement from the adjusted EBITDA loss of 2 million in fiscal 22. In fact, we reported positive adjusted EBITDA for the last three consecutive quarters, with Q4 23 reaching 2.2 million compared to an adjusted EBITDA loss of 0.8 million in Q4 prior year. Throughout fiscal 23, we focused on enhancing profitability and cash flows across all of our platforms. Despite challenges in top-line revenue growth, we prioritized operational efficiency and implemented significant cost reduction measures. Some of these measures were implemented in mid Q4 fiscal 93, that was mid-February, and also in early April 2023, and therefore, they're not yet fully reflected in the fiscal 23 results that I just talked about and we published yesterday. Like many other technology companies, we faced severe labor shortages during fiscal 22 and in the first half of fiscal 23, resulting in increased labor costs and a greater alliance on contractual workers. These factors affected our profitability during the year. The second half of fiscal 23 presented additional obstacles to revenue growth due to challenging macroeconomic conditions. Some clients shifted their priorities, leading to project slowdowns or scalebacks. Additionally, our e-commerce platform experienced slower pipeline conversions. However, We observed a gradual recovery in volume-based revenues from our e-commerce clients, surpassing pre-COVID levels. Although the government sector expressed interest in digitizing their e-procurement system, the pipeline conversion for our e-procurement platform solutions remained slow throughout fiscal 23. Some of the largest U.S. states and counties have recently launched full sales cycles to acquire a digital e-procurement system. We are actively involved and engaged in these opportunities. The recent announcement that we made about Anoka County illustrates this movement. There are numerous conversion opportunities in mid-market, which we believe is more predictable than larger state mandates. We made significant strides in improving profitability during Q4 23 and Q1 24. We took decisive actions to operate more effectively in response to macroeconomic conditions, softer client demand and higher workforce costs. This involves right-sizing our cost structure, reducing our workforce and implementing a hybrid workplace strategy to optimize office costs. Furthermore, on October 4th, 22, We sold InterTrade Systems, a wholly owned subsidiary, for a total cash consideration of $63.6 million. The proceeds from this sale, along from the transition services escrow amount received in Q1-24, were used to pay down our long-term debt. Looking ahead, our focus remains on simplifying and optimizing operations for our two core platforms, e-procurement, and e-commerce. Our objective is to maintain positive adjusted EBITDA and further improve our cash-from operations. We continue to further solidify our leadership position in the North American public procurement market. Our continuous efforts in integrating all of our different modules into a comprehensive e-procurement suite have garnered significant attention from large states and large local government organizations. As a result, our e-procurement solution is now included in the Spring 2023 Spend Matters Solution Map Report. This is a highly regarded publication by top industry analysts in the public markets. Currently, we are actively engaged in large procurement systems sales cycle in the largest province in Canada, as well as many of the largest states and counties in the U.S. This demonstrates the growing demand for our solution and the trust placed in our capabilities. As illustrated on slide five of our presentation, we are powering critical work of e-procurement. by integrating our various e-procurement products offering into a common suite of products offered in modules. There is a module for sourcing, for contracting, for procuring, connecting buyers and sellers, and the marketplace, which enables folks to shop on government-approved contracts. In the realm of e-commerce, our partnership with Acumatica, one of the fastest growing cloud ERP companies, in the B2B space has received a positive response from the industry. The launch of this partnership along with being recognized as an Acumatica certified application has positioned us favorably and opened up new opportunities for growth and expansion. Additionally, our K-commerce platform catering to SMBs and providing all in one e-commerce and digital payment solutions integrated with Acumatica Microsoft Dynamics and SAP Business One has been recognized as a top performer by G2 crowd business software reviews. This recognition is a testament to the quality and effectiveness of our offerings in this market. Over the past three years, MDF Commerce has undergone significant transformation across all of its products, its processes, and internal systems, and we are now entering the final phase of this journey. We are pleased that our financial KPIs, client adoption KPIs, are gradually turning into positive outcomes. I'm very proud of the last three quarters of positive adjusted EBITDA. With these encouraging signs, I am confident in the future of MDF commerce and our ability to deliver exceptional value to our investors, clients, and employees. And now, I'd like to ask Debra to comment on the corporation's financial results. Please go ahead, Debra.
spk01: Thanks, Luke, and good morning, everyone. I'd like to remind you that you can find our Q4 financial results, including the press release, our management discussion and analysis, and our financial statements on www.cedar.com and on the corporation's website. As Luke mentioned, our fiscal 2023 total revenues reached $128.3 million, a substantial increase of $20 million or 18.5% compared to fiscal 2022. From a Q4 perspective, revenues were $31.2 million, an increase of 1.3% or 4.3% compared to $30 million for Q4 of the prior year. In context, on October 4th, we sold InterTrade. Therefore, our fiscal 2023 results include approximately six months of InterTrade operations, which includes $7.2 million of revenue versus a full-year fiscal 2022 revenue for InterTrade of $13.4 million. InterTrade revenue for Q4 was $3.4 million of the prior year and clearly no revenue because we sold it in Q4 2023. Also, we acquired Periscope, a U.S. subsidiary in e-procurement, in August 2021. Therefore, our fiscal 22 results include seven months of Periscope operations, while 23 include the full year. I'll comment further on the financial impact of these business transactions on recurring revenue in a few minutes. The company's recurring revenue continues to trend towards 80% of total revenue at 78.1 for 2023 and an sorry, an increase versus the 77.4 in 2022. For fiscal 2023, total recurring revenue in dollars was 101.7 million, and this compares to 87.9 million, a significant increase of 13.8 million year over year. For Q4 2023, recurring revenue represents 24.4 million, compared to Q4 prior year of $26.1 million. That's 77.9% of revenue in Q4 this year versus 78.9% of revenue in Q4 of the prior year. Both the e-procurement and e-marketplaces platform solutions saw 2023 increases in recurring revenue in dollars, while the unified commerce platform, which we renamed the e-commerce platform following the sale of InterTrade, had lower recurring revenue in dollars, mainly due to the sale of InterTrade. InterTrade had contributed recurring revenue of $6.7 million for the approximate six months until its sale in October, compared to $12.5 million in 2022. And InterTrade had high recurring revenue as a percentage of total revenue in excess of 90%. I'll provide the highlights of revenue by nature and by platform in a few minutes, but first I'd like to comment on the company's overall 2023 profitability. We are pleased to announce that Q4 marks the third consecutive quarter with a positive adjusted EBITDA, which was $2.1 million. This compares to an adjusted EBITDA loss of $0.8 million in Q4 of prior year and an adjusted EBITDA loss of $1.1 million in Q1 of 2023. We've had quarterly improvements with positive adjusted EBITDA of 1.4 million in Q2 of 23, positive adjusted EBITDA of 0.9 million in Q3, and again, 2.2 million for Q4. The adjusted EBITDA for the fiscal 2023 was also positive at 3.4 million compared to an adjusted EBITDA loss of 2 million in the prior year. That's an overall improvement of 5.4 million year over year. As Nick mentioned, we took action to operate more effectively and implemented several cost-saving reductions during Q4 2023 and also in early Q1 2024 with the objective of improving overall profitability and operating cash flow. We right-sized operations in response to various macroeconomic conditions, including being faced with higher workforce costs and softer demand mainly in our e-commerce platform, particularly in the e-grocery sector. We implemented workforce reductions from over 800 employees and contractual consultants at the beginning of fiscal 2023 to less than 650 with virtually no contractual consultants as of Q1 2024. Therefore, we've significantly reduced payroll and related costs. We've also streamlined operations by proactively deprioritizing certain projects and curtailing other operating expenses, including office costs by reducing our global lease footprint and maintaining our decision to continue with a hybrid workplace strategy. The full benefit of these various cost-saving initiatives is not fully reflected in our Q4 2023 results. That's because the workforce reductions occurred mainly in mid- Q4 2023 and in early Q1 of 2024. Also, our further office-based reductions will take effect mostly at the beginning of Q3 2024 at the maturity date of our Longueuil head office lease and of our Austin, Texas lease. Once these lease reduction cash savings begin, and the workforce reduction-related restructuring costs, which are primarily comprised of termination benefits to employees, have been fully paid out in the latter half of 2024, this will have a positive impact on operating cash flows. With these cost-saving measures, we expect to be in a position to maintain a positive adjusted EBITDA trajectory. Net loss and adjusted net loss for full fiscal 2023 Despite significant year-over-year revenue growth, we did experience a net loss of $85 million, which is significantly higher than the $23.9 million lost in fiscal year 2022. The main reason for this is the net loss that we recognized relating to the goodwill impairment, which is a non-cast goodwill impairment loss that was recorded in Q2. This impairment loss was partly offset by the gain on the disposal of the sale of intertrades, which was $23.1 million. Therefore, adjusted net loss for 2023 was $23.1 million compared to $23.9 million in 2022. Net loss and adjusted net loss for Q4. Q4 net loss was $4 million or $0.09 net loss per share, both basic and diluted. And this compares to a net loss of $8.7 million or $0.21 per share net loss, basic and diluted in 2020. Q4 2022. This significant decrease in net loss of 4.7 includes a $1.7 million non-cash gain on lease modification that was recorded in Q4 of 2023. Q4 2023 also had lower operating costs despite higher restructuring costs, lower finance expenses due to the repayment of long-term debt with the proceeds from the sale of intertrade, and lower income tax expense. I invite you to refer to Appendix A of our slide deck for the reconciliation of net earnings and loss to adjusted EBITDA and also to adjusted net loss. I'd like now to come back to revenue with a focus on revenue by nature and revenue by platform. Our Q4 right of use revenue, that's our SAS subscription revenue, increased by 14.5% or $3 million from $20.7 million to $23.7 million. which we believe represents solid growth from this revenue source, which is generally recurring in nature when subscriptions are renewed. We also benefited from other revenue of $0.7 million recorded in Q4 2023. This is relating to the post-closing transition services that we provide to the acquirer of InterTrade. As mentioned previously, despite positive growth in right-of-use revenue, we saw a Q4 decrease in transaction fees compared to Q4 of last year in the amount of $1.8 million. And professional services revenue also decreased by $0.9 million compared to Q4 of the prior year. This is mainly in our e-commerce platform as large client deployments were completed and clients slowed down certain projects. And we also are getting close to the completion of large implementation in our U.S.-based state e-procurement transaction models. For a summary of our Q4 Financial 2023 financial results from a platform perspective, I'll turn first to e-procurement. The e-procurement platform revenues were $20.3 million, an increase of 28.6% compared to $15.8 million in Q4 last year. The U.S.-based e-procurement activities contributed positively to revenue growth, with an increase in revenue of 39.8% over the same period last year. Recurring revenue as a percentage of total revenue for the eProcurement platform was 87.3% for Q4 of this year, compared to 90.4% in Q4 last year. Total eProcurement revenues for the quarter were again, and for the last quarter, impacted by an acquisition accounting fair value adjustment related to the Periscope acquisition in August of 2021, and it resulted in a reduction of revenue of $0.1 million in the quarter compared to $1.9 million in Q4 of 2022. Our main e-procurement products, namely Merck, BidNet, and S2G, have continued to perform well, with combined revenue growth for Q4 this year over Q4 last year of approximately 4%. As Luc mentioned, it's a focus area to continue to consolidate our platform technology and simplify our product offering in e-procurement. At this time, we're not seeing revenue growth compression as we consolidate our offerings, but we are monitoring this closely over the coming quarters. It is a priority to ensure that this product offering simplification and product improvements will enable commercial benefits. We've seen revenue growth in the e-procurement platform, even as we migrate clients onto the new e-procurement products. For the e-commerce platform, which again, we call unified commerce in our MD&A because we called it that until the sale of Intertrade. So e-commerce generated revenue of $6 million for Q4, a decrease of $3.8 million compared to Q4 the prior year. There are two main reasons for the overall decrease in the unified commerce platform revenue. First, the sale of intertrade, which accounted for 3.4 million of revenue decrease, and it was partly offset by the 0.7 million other revenue from post-closing transition services that I mentioned a few minutes ago. E-commerce also had lower professional services revenue in the orchestra platform as large deployments and solution integrations were completed. And we've seen a shift where large e-commerce customers have been cutting back on their spending or delaying projects that generate professional services revenue. The impact of this market shift is felt primarily in our professional services revenue and in volume-based revenue. Recurring revenue for e-commerce represents approximately 42.5% of platform revenues for Q4 2023 compared to 59.4% for unified commerce for the same quarter of last fiscal. Our e-marketplaces platform performed well in both Q4 2023 and overall for 2023. Total revenues for e-marketplaces platform were $4.9 million for the quarter, an increase of $0.6 million, or 13.2% when compared to Q4 of the last year. This increase relates mainly to the broker forum, which is our electronic parts marketplace, and it continues to benefit from the global supply chain shortages in electronic components, and this marketplace continues to generate higher transaction volumes. It's worth mentioning that for 2023, our e-marketplace platforms were 19.2 million, an increase of 3.3 million, or 21%, compared to 15.9 in the prior year. Recurring revenue for the e-marketplace platforms represents 82.1% of platform revenue compared to 73.4% in Q4 of 2022. Our e-marketplaces platforms are well-established and mature, and our objective is to operate these platforms efficiently and profitably by maintaining a competitive pricing and by managing our costs. Finally, on our balance sheet, The sale of InterTrade on October 4th for cash consideration of $63.6 million represented another significant step in our efforts to add strategic focus to the corporation and to allow us to deleverage our balance sheet. The proceeds from this sale, along with the transition services escrow amount of $2.7 million, which we received in Q1, were used to pay down our long-term debts, which had been primarily associated with the strategic acquisition of Periscope in August 2021. By reducing our long-term debt, we achieved lower interest expense and strengthened our overall balance sheet position. At March 31, 2023, the cash position, net of debt drawn on the revolving facility of $7.4 million, lest the cash on hand of $4 million represented a net debt of $3.4 million compared to a net debt of $44.5 million at March of the prior year. Restructuring costs paid in the quarter related to reducing our workforce and transaction-related costs paid on the sale of intertrade did have an unfavorable impact on our closing cash position for Q4. With the various initiatives that we've undertaken, We anticipate improvements in our cash from operations in fiscal 2024 compared to 2023. And despite some levels of variability that we expect on working capital, including the timing of e-business tax credits that are filed annually, we do expect to see positive cash improvements in the current year. With that, I'll turn it back over to Luke.
spk03: Hey, thank you, Deborah. All good news.
spk02: As you've heard, significant progress on all fronts in fiscal 23, despite the various headwinds in the market. Three quarters of positive EBITDA, balance sheet is strong, recurring revenue was 101.7 million. We've taken measures over the past few quarters to put the business in a financially stable position. We've addressed profitability and improved cash flows generated from operations while positioning ourselves to win new business particularly in e-procurement, where the opportunity pipeline is quite healthy. We expect that material large e-procurement contracts will be awarded in the next 12, 24 months across U.S., Canada, and we're completely engaged and active on all those fronts. Our product integration strategy is advancing and being recognized by the industry, and our pipeline, as I mentioned earlier, keeps growing. We're confident that we will continue to further solidify our leadership position in public procurement. With that, I would like to open the lineup for questions. Rocco, can you please take the call to facilitate the question period?
spk00: Yes, sir. If you would like to ask a question, please press star then 1 on your touch-tone phone. If you're using a speakerphone, we ask that you please pick up your handset before pressing the keys. To withdraw your question, please press star then two. Ladies and gentlemen, today's first question comes from Kevin Krishnarotney with Scotiabank. Please go ahead.
spk04: Hey there. Good morning. Question for you on the number of RFPs that you have out with, you know, you mentioned a large province in Canada and a number of states. It sounds like some good opportunities here. Is there a way for us to understand, you know, how to size RFPs? These opportunities, and I think, Luke, just in your closing comments there, you mentioned some of these will start to occur maybe in the 12- to 24-month range. I was curious if you can give us some thoughts there on the potential timing of awards and how this might flow through to the financials.
spk02: Thanks, Kevin. I mean, we can't disclose the opportunities by name, obviously, but procurement, public procurement is one of the last areas where strong digitization is required. And we're in the very envious position where many of these large organizations needs to digitize their procurement operations because most of them are still very highly manual. And they've all come to the market quite recently. And we've been very active in obviously presenting and promoting our solutions. And they're all now at the point of engaging in finding the best solution and then picking one. We see a lot of activity there. We're present on all fronts. So the only part that's always hard with public or government is to pinpoint a date at which this will happen because we do know that the sales cycles are long. And on many of these cases, we've been on that sales cycle now for a good portion of a year, in some cases more. So we expect that all this work is coming to fruition, but I can't give you at this point a prediction on how and when this will turn into money for us. But the demand there is very strong. And again, as mentioned before, these are not special projects associated with building new crazy infrastructure. Many of these procurement systems simply administer the day-to-day work that public procurement needs to do in order to enact on their mission. So very confident that we will see some of these deals come through. We press released one just a few weeks ago, which was Anoka County. It's a pretty significant county. That's a little bit of what we call a mid-sized market. But you should see the flow of mid-sized market is always more predictable than the large states, which can obviously swing the results one way or another.
spk04: Okay, so got it. Thanks, Luke. In the meantime, if you think about the next few quarters out here, you did $20.3 million in total for the EPRI. segment this quarter. I think, Deborah, you mentioned you're not seeing revenue compression. So just give us views there on how to think about the organic, whether it's the growth profile from the existing business, how to think about the drivers there.
spk03: Deborah, you want to take a stab?
spk02: Or, well, maybe while you might want to put some more precise numbers, One thing that I want to mention is some of these deals are obviously quite large in nature and they do create some lumpiness in the revenues over the quarter. So some of our products could easily use organic growth percentage because they work with a large volume. And in those cases, predicting a percentage makes sense and works. In the large deals that we talked about that are in the pipeline, it's very hard to use percentages because once they start, they immediately contribute pretty significant growth. And remember that these are typically five years, in certain cases, seven year contract. So they provide revenue for a quite long time.
spk01: Right. So just to add to that, we've been seeing organic growth in the procurement sector of around 4% or 5% up to 8%. That's sort of what we're seeing on our traditional products, Merck, SpidNet, S2G, etc. And as Luke mentioned, there are many opportunities that bring on significant numbers. These mid-size deals or transaction model deals are significant. they have a portion that is recurring revenue, but they also have quite typically significant implementation fees associated with them. So I think, you know, it's hard to predict that side of things because of the, call it the lumpiness of larger clients, but from an organic growth perspective, we're able to maintain the low single digit, low to mid to high single digit organic growth.
spk04: Okay, great. That's super helpful. Thank you for that. Maybe switching to unified commerce, a bunch of different drivers there to think about. Number one, do we get any more post-transition services related to SPS over the coming quarters, or is that complete?
spk01: We do have a little bit left. We'll see it in Q1, a number similar to what we've seen in Q4. and then it will drop off after that. That was arrangements that we made with the acquirer of InterTrade to make sure there was a smooth transition, and we carve out revenue for that. But it should end in Q1 of 2024.
spk04: Gotcha. And then on KCommerce, that line looks like it's been pretty steady, some slight growth there. I think you've got a number of drivers there. You talked about integrations, but the orchestra line, you know, it's been down on, you know, lower implementation. Is that kind of going to stabilize into 2024?
spk01: Yeah, exactly. So Orchestra had some larger clients that we had won several years ago, and some of those implementations straddled several years. So part of it is just a natural drop-off of that non-recurring implementation revenue. And then our clients often do projects, so they use our run rate teams and have professional services relating to that. So depending on what projects they have on the go, that portion of non-recurring implementation or professional services is probably expected to stay at the level we currently have. Luke, anything you want to add on our picture? Yeah.
spk02: No, I think you've said it all, Debra. Obviously, large deployments in retail, whether in grocery or various other goods, are right now kind of waiting to see what's going to happen to the economy. Are consumers going to get back to shopping online? And, you know, recession, interest rates, etc. all make the consumer a little more worried and tending to the goods and services that are acquired on the consumer side on the internet tend to be a little more of the non-essentials. So that's why we're seeing a stabilization, but the good, uh, I'd say the good element is you see that, uh, the recurring revenue stays there pretty strong. Okay.
spk01: And that's a good point because as the professional services drop off, we will see the, an increase in the recurring revenue because that's just the way the math works. Right. But, um, So we do expect to see higher recurring revenue in the orchestra platform, which has typically looked low because of those professional services and implementations.
spk04: Got it. Yeah, no, makes sense. Maybe just the last one for me, then just on the cost side of the equation, you mentioned there's still some incremental cost savings that will feel in Q1 relative to Q4, given, you know, some of the restrictions are done in the quarter. Can we talk about, you know, how much is expected there? And then second, um, How do we think about the level of restructuring that'll be booked and I guess adjusted out of the EBITDA number? Just talk about the restructuring. I think there's going to be some payouts throughout the remainder of 2024.
spk01: Yeah, so in Q1, we did a press release on our cost savings and some of the workforce reductions. So we announced at that time that we had a workforce reduction of around 40 people and that the approximate restructuring costs relating to that would be about $700,000. So when we do announce to employees that there are departures, that's when the expense gets booked. So that would be a good approximation of what to expect in Q1. From a cash flow perspective, sometimes the payments are a little bit longer than that, but certainly the amounts are the same. It just straddles a longer period from a cash payout perspective. Additional cost savings that we would expect in 2024 relate to further reductions in our lease office space so the best way to see what we have in terms of office space would be to look at the annual information form which we filed this morning or yesterday I guess and it is available on our website on page 11 and 12 you can see the facilities that we have I talked about earlier the Longueuil office, and you can see in there there's a significant space reduction. We're going to go down to about 17% of the square footage that we currently have. And the Austin lease will also reduce the cost of leasing. And then for the remaining properties that we have in there, we will work to either sublease or end the lease at the end of the lease term. So there will be some further... sort of global office space reductions as soon as we can do that, either through the sub-laced market or the natural end of release.
spk04: Okay, so just to be clear, 700,000 restructuring, so that'll hit in Q1?
spk05: Yes.
spk04: Okay, and so you'll likely be adjusted EBITDA positive every quarter, you know, through 2024? And would you be cash flow positive in Q1 as well? Be cash flow?
spk01: So we're operating our adjusted EBITDA. We're expecting a positive adjusted EBITDA throughout 2024. And we're doing everything to be positive from a cash flow operations perspective. We do have some lumpiness in terms of we sweep all of our cash onto our revolving facility. And depending on timing of certain payments, that debt could vary to the extent that we have working capital We also have quite large CDA credits or the e-business tax credits, which we file at the end of the year. We have some credits receivable from prior years. So March 2022, there's still a couple of million to receive in the in the next few months on that, as well as we will be claiming the March 31st, 2023 credit. So the use of debt is a little bit lumpy depending on what our working capital requirements are, but we're certainly working to be cashflow positive from our operations perspective.
spk04: Okay, great. Super. I'll thank, thanks for all the color. I'll pass the line.
spk00: Thank you. Ladies and gentlemen, as a reminder, if you'd like to ask a question, please press star than one. Our next question today comes from Richard C. with National Bank Financial. Please go ahead.
spk05: Hi, this is Mihir calling for Richard. Just wondering, in terms of the transaction revenue, can you just talk about the current trends that you're seeing with your current customers and just how, you know, like the recent debt ceiling deal is basically forcing the government to reduce their spending. How would that impact the transaction revenues moving forward?
spk02: Thanks for the question. The way that our transaction model is built, as I mentioned a little bit in my discussion, we evaluate the, I would say, very commodity purchases that the various states and local agencies do. We then make an estimation of how much that will be over a five-year period based on a very large amount of data sets. And then we charge a percentage based on that fee. So the revenue is constant over the five-year period. And right now, with our current customers, we're absolutely not seeing any reduction in their normal day-to-day spending. What you just alluded to sometimes comes with I would say extraordinary projects. If you would take building of a large new highway network or potentially buying some new war equipment, which is not covered by the type of projects that we do. So it's really the very regular, mostly computers, IT services, security services, legal services, all of the goods that various departments, transportation, etc., require to maintain roads, maintain schools, and on and on. So I'm not expecting any impact of that. On the contrary, the tightness of the budgets at the various states and local governments really show or create the opportunity for our platform to create very large economies for these states and local governments. And once we implement, they make extremely large savings compared to all of the manual work that they do. So those to me are pretty significant. Positive indicator is that we're in the right spot at the right time. This is a market that's ripe for grab.
spk03: Okay, thank you. I'll toss the line.
spk00: Thank you. And ladies and gentlemen, this concludes the question and answer session. I'd like to turn the conference back over to Luke Fugliatro for any closing remarks.
spk03: Well, thank you all for being with us this morning.
spk02: Looking forward to reading your updates, and have a great Canada Day and Fourth of July Day coming up in the next few days. Thank you.
spk00: Thank you, sir. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.
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