TECSYS Inc.

Good morning, everyone. Welcome to Texas first quarter fiscal year 2024 results conference call. Please note that the complete first quarter report, including MD&A and financial statements, were filed on CEDAR Plus after market calls 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 remind everyone that this call is being recorded on Friday, September 8, 2024, at 8.30 Eastern Time. I would now like to turn the conference over to Mr. Peter Burrenton, Chief Executive Officer at Texas. Please go ahead.

Thank you. Good morning, everyone. Joining me today is Mark Bintler, our Chief Financial Officer. We appreciate you joining us for today's call. As many of you saw in our results posted yesterday, our company began fiscal 24 with another solid quarter led by record revenue and strong fundamentals. With 44% growth in SaaS revenue, We've seen the results of our investments over the last several quarters in business development and R&D. We believe our continued momentum is a testament to our clarity of vision, sustained investment in technology, and obsession with our customer success. Our primary mission remains unchanged, to empower supply chain users to perform their tasks efficiently and effectively. Done right, organizations running these supply chains are able to operate more efficiently, mitigate risk, adapt to market demands, differentiate themselves from competition, and seize opportunities to grow. Our role with Texas is to provide the right combination of software, services, and expertise to meet those business objectives. And that's what we have been doing. We have consistently demonstrated our ability as a technology partner to provide solutions that meet and exceed customer expectations. Much of this will be on full display in a couple of weeks. where we will be hosting the 2023 Texas User Conference, our first since the pandemic. With a high level of enthusiasm, we have higher registration numbers than any event in our 40-year history. We've been laying the groundwork for this event over the last few months and have been promoting a remarkable lineup of customers and strategic partners to help strengthen our base and put the spotlight on the business successes experienced by them. From Warner Electric's journey of innovation and the AI-driven augmented cluster building to insights at St. Luke's Health Systems speaking about their visionary consolidated pharmacy service center. From Intermountain Health and Baylor Scott and White Health to Nissan North America sharing their supply chain management stories, we are confident that the successes of our customers will create new market opportunities. And with AWS, Locus Robotics, Zebra Technologies, Rise Now, and other partners, we have more partner representation than any other conference in our history as well, an endorsement of our strengthening global alliances ecosystem. We look forward to hosting an amazing user conference where we have the opportunity to showcase innovation, best practices, and knowledge sharing. Turning back to the results, I'd like to take a moment to summarize the key events of the first quarter of fiscal 24 and 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 Q&A. Our company began fiscal 24 with sustained growth underscored by that 44% year-over-year SAS revenue growth, a 23% increase in total revenue, and a healthy RPO up 36% over the same time last year. We added new logos across verticals and geographies, including two new healthcare networks in the border, one of which was in Canada. We also signed a new healthcare network in August, just after the quarter end. We again closed solid base business, including significant expansions across verticals and renewals that extended commitments from existing customers. Our SaaS bookings at $1.9 million in the quarter were down compared to the same quarter last year. Q1 of last fiscal year was an unusual comp with pent-up demand releasing post-COVID and an exceptionally large order in that quarter as well. Q1 of this fiscal year was a more normal Q1 with summer vacation impact. We remain encouraged by continued solid new pipeline creation and overall market activity. So as we close out another successful quarter, we're pleased that we continue to capitalize on the opportunities in front of us. We continue to add new hospital networks and global brands to our repertoire of clients, and we enjoy an expanding pipeline of new SaaS opportunities, expansions, and conversions. We see a solid path for shareholder value creation. As we continue to invest in the solutions we sell and the manner in which we sell them, Texas is proving to be among the best cloud-based solutions available in the markets we serve. And we have the people, the partners, the products, and the plan to provide what the market demands. Mark will now provide further details on our first quarter financial results, as well as financial guidance on several key metrics.

Thank you, Peter. We're pleased with strong performance in our first quarter ended July 31st, 2023. We had yet another record quarter in total revenue at 42 million. That's 23% higher than 34.2 million reported for the same period last year. As many of you know, a significant portion of our revenue, in fact, about 73% this quarter, is denominated in U.S. dollars. As a result, movements in currency exchange rates have an impact on our reported revenue and growth. FX rates, including the impact of hedging, had a positive $1.5 million impact on revenue in the quarter compared to the same quarter last year. On a constant currency basis, total revenue growth was 17% in Q1 of fiscal 24 compared to the same quarter last year. Total revenue, excluding hardware, increased 16%. compared to the same period last year, or 11 percent on a constant currency basis. We continue to experience strong and steady revenue streams underpinned by a 44 percent increase in SAS revenue, up from $8 million in Q1 of fiscal 23 to $11.5 million in Q1 of fiscal 24. On a constant currency basis, SAS revenue was up approximately 38 percent compared to the same quarter last year. SAS remaining performance obligation, or SAS RPO, was $139.4 million at the end of Q1 fiscal 24. That's up 36 percent from $102.5 million at the same time last year. On a constant currency basis, that growth was 33 percent. Maintenance and support revenue for the three months ended July 31, 2023, was $8.3 million. That was flat compared to the same quarter last year, or down about 4% on a constant currency basis. Maintenance and support revenue generally follows the trend of license revenue, and we expect that as current customers migrate to our SaaS offering, maintenance and support revenue will decline over time. Professional services revenue for the quarter was $14.9 million. That was up 9% from $13.6 million reported for the same quarter last year. or up 5% on a constant currency basis. As we've noted in the last few quarters, we're starting to see the impact of our transition to SaaS ultimately have on our professional services revenue line. That is, we're seeing a continued reduction in custom development work as customers opt for a more out-of-the-box approach to platform implementations. We're also continuing to experience the increased collaboration of our partner ecosystem in helping to implement our suite of solutions. While we expect that over time these factors will continue to moderate our professional services revenue growth, we had another solid quarter of professional services bookings, which I'll speak to in a moment. As we disclosed in our published MD&A, we expect total services revenue, so that's combined SaaS, maintenance, support, as well as professional services, ranging between $34.5 million and 35.5 million per quarter in the short term. Hardware revenue in Q1 fiscal 24 was 6.8 million, up 77% compared to the same period last year. As a reminder, we sell primarily third-party hardware to our customers for warehouse operations and in-hospital point-of-use storage and tracking. While hardware revenue can tend to be uneven, It is a key component of our market offering and thereby supports our recurring revenue business. Like last quarter, our hardware backlog remains strong, driven primarily by hospital network point-of-use orders. Turning now to bookings, SAS bookings are reported on an annual recurring revenue basis, and as Peter mentioned, SAS bookings were $1.9 million in the quarter, which is down 50% compared to $3.9 million in the first quarter of last year. Professional services bookings were $13.8 million in the quarter. That's up 42% compared to $9.7 million in the same quarter last year. Professional services backlog was a robust $40.2 million at July 31, 2023. That's up 31% from the same time last year. For the first quarter, total gross profit was $19.5 million. That's up 32%. compared to $14.8 million in Q1 of last year, and that's led by higher gross profit contribution from SAS, maintenance, support, and professional services. As a percentage of revenue, total gross margin was 46% in the quarter compared to 43% for the same period last year. Combined SAS, maintenance, and support, and professional services gross profit margin for the three months under July 31st, 2023 was 50%, compared to 46% in the same period in fiscal 2023. The main component of the increase in this gross profit margin was SAS margin expansion. There was also some tailwind here from FX. Switching now to our expenses for the quarter, operating expenses increased to $17.7 million That's higher by 3.1 million of 21 percent compared to 14.7 million in Q1 of fiscal 23. The increase was primarily the result of higher research and development costs as well as higher sales and marketing costs. Looking ahead to Q2 of fiscal 2024, we expect sales and marketing costs to temporarily increase primarily due to added marketing program investment including costs related to our user conference, which, as Peter mentioned, is in September. We also expect that research and development costs will increase slightly in Q2, resulting from investment in our platform and product offering and the normal impact of our annual salary increase cycle. Net profit for the quarter was $1.2 million, or $0.08 per fully diluted share, compared to $40,000, or $0.00, for fully diluted share in the same period last year. Compared to the same period last year, net profit was positively impacted by the higher contribution from SAS and associated higher gross profit and favorable foreign exchange. Adjusted EBITDA was 3.2 million in Q1 of fiscal 24 compared to 1.5 million last year. Net profit and adjusted EBITDA were both positively impacted by favorable foreign exchange of approximately $1.2 million compared to the same period last year. We ended fiscal 2024 with a solid balance sheet position. We had cash and short-term investments of $31.9 million and no debt. Q1 net cash used in operations was $6.9 million, primarily the result of normal seasonal working capital changes in that quarter. Finally, with respect to financial guidance, With our growing SAS revenue driving up recurring revenue, we have greater visibility into future revenue. As a result, recall the last quarter for the first time we provided financial guidance. We would like to reiterate that guidance for total revenue growth in fiscal 24 in a range of between 10 and 15 percent, total SAS revenue growth for fiscal 24 in a range between 35 and 37 percent, and in terms of profitability, we're reiterating financial guidance for adjusted EBITDA margin in fiscal 24 of 6%, and the fiscal 25 adjusted EBITDA margin in a range between 8% and 9%. I'll now turn the call back to Peter to provide some outlook comments.