TECSYS Inc.

Good morning, everyone. Welcome to Texas' first quarter fiscal year 2025 results conference call. Please note that the complete first quarter report, including MD&A and financial statements, were filed on Cedar Plus after market closed yesterday. All dollar amounts are expressed in Canadian currency and are prepared in accordance with international financial reporting standards. The company has added a companion presentation to today's calls. which is available on the website at www.texas.com forward slash investors. 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 6, 2024, at 8.30 a.m. Eastern Time. I would now like to turn the conference over to Mr. Peter Brereton, Chief Executive Officer at Texas. Please go ahead, sir.

Thank you. Good morning, everyone. Joining me today is Mark Butler, our Chief Financial Officer. We appreciate you joining us for today's call. As many of you have likely seen in the results issued last night, our company began fiscal 25 with another solid quarter, led by strong SaaS revenue and bookings performance across market segments. With year-over-year SaaS revenue up 33%, and SaaS bookings up 57%, our momentum continues across the board. Our differentiation is clear. We are strategically positioned for growth, and our team is dedicated to delivering leading-edge solutions with a relentless focus on customer success. I would like to take a moment to summarize the key events of our Q1 results for Fiscal 25. Mark will then walk us through the financial results in more detail. And finally, I will comment on our outlook, followed by a Q&A session. If you're following along on our companion presentation, I'll be speaking to slide three. In Q1, we delivered solid performance with 3 million SAS bookings, up 57% year over year, driven by broad participation across our key verticals. We secured a major healthcare migration with one of the largest IDNs in North America, representing over 100 hospitals. which I'm calling out to highlight the significant scale and white space penetration potential of each new deal. We also saw another pharmacy expansion deal, reinforcing our continued progress and growth opportunity in the pharmacy sector, as discussed in previous quarters. Contributions from general distribution include a new logo, a new cloud migration, and a competitive win-back, reinforcing our position as the top choice for those investing in a modern supply chain solution, whether they're new, existing, or returning customers. On the SaaS and services side of the business, we are properly resourced for our guidance and growth, reinforced by a robust backlog. Our RPO is up 40% year over year, reflecting steady bookings and renewals. Adjusted EBITDA remains strong at 2.6 million. Additionally, we've continued to buy back shares under our normal course issuer bid, spending $2.2 million on share buybacks in Q1. The opportunity to expand within existing accounts is increasing across all our verticals as we continue to build upsell and cross-sell value propositions and refine how we deliver that value through product innovation, features, and functions. As I've shared previously, this is particularly true in healthcare. where we often start by addressing a single entry point, prove out the value, and expand across an entire organization. This is an important growth driver for us, with inroads into pharmacy serving as a key example. We continue to experience traction in the pharmacy supply chain with a growing interest in the Consolidated Pharmacy Service Center, or CPSC. This provides... Pardon me. This provides a centralized distribution model similar to what we do in hospital general supplies adapted for pharmacy. This quarter, we secured an add-on project at University of North Carolina Health. With the U.S. DSCSA compliance legislation coming into effect this November, recently released customer stories from Texas Children's Hospital and Baptist Health and half a dozen IDNs now on board. We are well positioned to build on this early momentum as the market solution within an industry where we already have a solid position. We're also accelerating that market access with a partner ecosystem that is stronger than ever. For example, you may have seen some co-marketing with Terso, Tracelink, and RiseNow, which highlights our differentiated position in key areas like DSCSA and pharmacy. This type of market engagement, not to mention newly certified technology integrations and ongoing go-to-market collaborations, continues to play an important role in product and pipeline development. This effort is proving valuable, with about a third of our deals being partner-influenced over the last 12 months. Whether directly with Texas or via partners, we are solidifying our position as the system of choice for organizations grappling with supply chain complexity. To cement that position, we are hyper-focused on customer sat. Last quarter, I emphasized the importance of customer success as we scale. As our base grows, markets diversify, and partner ecosystems develop, that effort is taking shape in the form of higher levels of customer service. We're actively involving customers in value-added activities like user groups, industry workshops, and proactive customer checkpoints. This ongoing effort is already reflected in positive NPS movement, and it will continue to drive our business strategy moving forward. Part of that customer success is looking for new ways to deliver value to them. In July, we announced the appointment of Rex Ahlstrom as Chief Strategy Officer. Tapping into his 25 years of experience, Rex will drive global initiatives to maximize the value of Texas' evolving SaaS offerings and data capabilities. His expertise in digital transformation and innovation aligns perfectly with Texas' vision, further positioning us to capitalize on market opportunities and enhance customer value. We've also added depth to our board, with two new directors voted in at yesterday's shareholder meeting, Stephanie Verstraet and Sri Priya Senegar. Stephanie is Chief Marketing Officer at Teladoc Health and has had leadership roles at Expedia and PepsiCo. She brings expertise in M&A, brand building, and performance marketing. Priya has extensive experience leading global teams in product and data engineering and and platform development at organizations including Olo, Manhattan Associates, and Bank of America. We're enthusiastic about the significant impact they will bring to the board. In more company news, in July, Texas was named a 2024 Great Place to Work in Canada, the U.S., and Denmark. This recognition not only speaks to the culture we've built around the world, which we're very proud of, It's also about what it means for our customers. Happy, engaged employees lead to better customer service and higher customer success rates. As we grow our team and capacity, this achievement reinforces our belief that a strong internal culture directly contributes to the quality of service, value, and innovation we deliver to our customers every day. And so, as we continue to invest in the products we sell and our go-to-market strategy, Texas has proven to be among the best cloud-based solutions available in the markets we serve. The steady growth we have experienced affirms our vision and strategy for shareholder value. Mark will now provide further details on our first quarter financial results, as well as financial guidance on several key metrics.

Thank you, Peter. We're pleased with the performance in our first fiscal quarter ended July 31st, 2024. I'll start with slide four and focus first on FASP. SAS continues to be the key driver for our growth, and we believe the key driver for value creation. SAS revenue growth is driving our recurring revenue, and during the first quarter, SAS revenue growth was 33%, reaching $15.3 million. As Peter mentioned previously, our SAS bookings were up 57% to $3 million in the quarter. Our higher growth SAS revenue has now overtaken professional services revenue as our largest single source of revenue, and we expect this to continue to play out in fiscal 2025 and beyond. Total revenue for the quarter reached 42.3 million, representing a 1% increase compared to the same period last year. It's important to note that when hardware revenue is excluded, the growth rate jumps to 9%. The strong underlying growth in SAS revenue is somewhat muted here by year-over-year fluctuations in both professional services and hardware. Our primary focus remains on driving consistent growth in our core SaaS revenue stream, and we're not concerned about the variability in professional services and hardware components of the business. Professional services revenue for the first quarter was 13.4 million. That was down 10% from 14.9 million reported for the same quarter last year, and down from $14.4 million sequentially compared to Q4. As noted in our MD&A, the timing of professional services revenue is affected by project delivery schedules, which can be outside of our control. Recent quarters have demonstrated that we're staffed to deliver more than $14 million of professional services revenue per quarter, and based on our current backlog and visibility into project timelines, we expect to return to this level. Supporting this, we had strong professional services bookings in Q1 at $17.2 million, and that was up 25% compared to the same period last year. We expect professional services revenue will continue to fluctuate based on the balance of integration partner involvement and project delivery timing. For the first quarter of fiscal 2025, Gross margin was 47% compared to 46% in the same period last year. Combined SAS, maintenance, support, and professional services gross margin for the three months ended July 31, 2024, was 49%. That was down compared to 50% in the same period last year. The impact of increasing SAS margins in the first quarter of fiscal 2025, which, by the way, continue to track as planned, was offset by the impact of reduced professional service margins in the current quarter. We're very happy with the continued positive trajectory in our SaaS margin profile. Net profit in the quarter was down about $400,000 to $798,000 compared to $1.2 million in the same quarter last year. Adjusted EBITDA was $2.6 million in Q1 fiscal 2025 compared to $3.2 million same period last year. We ended Q1 fiscal 25 with a solid balance sheet. We had cash and short-term investments of $27.1 million and no debt. As Peter mentioned, we used $2.2 million of cash in the quarter to buy back shares under our normal course issuer bid. And additionally, the board yesterday approved a quarterly dividend of 8 cents a share. With respect to financial guidance and moving now to slide five, we are reiterating full year 25 guidance as follows. Total revenue growth between 7% and 9%. SAS revenue growth between 30% and 32%. And adjusted EBITDA margin between 8% and 9%. Additionally, we're reiterating adjusted EBITDA margin guidance for fiscal 2026 of between 10% and 11%. I'll now turn the call back to Peter to provide some outlook comments.

Thanks, Mark. Texas kicked off fiscal 25 with solid performance, building on the strong momentum from last year. Our balance sheet remains strong, supported by a healthy backlog and sales pipeline. We are seeing widespread buyer intent across target markets, with opportunity cycles accelerated by a highly capable sales team. with the tools, talent, and strategic partners to capitalize on a market ready to invest. As mentioned earlier, our existing footprint in key markets reinforces our confidence that we are well positioned to upsell and cross-sell, with healthcare and pharmacy by extension serving as an important growth engine for us. Our value proposition in pharmacy is compelling, and we see no signs of this slowing down. Over and above our IDN business with the added pharmacy white space, we are seeing growth signs in our medical and pharma distribution sector, driven partially by that DSCSA legislative pressure mentioned earlier. I should mention DSCSA is the Drug Supply Chain Security Act. It requires traceability that Texas solutions enable. Our converging and general distribution business also represents a substantial market opportunity. We are well positioned to pursue new marketplaces and geographies within this space. We will continue to invest to drive our growth alongside a market that is changing. Change is spurred by aging legacy systems, digital adoption, and a fundamental shift in consumer expectations, which now demand more efficiency, transparency, and responsiveness from supply chains. We are pleased that our Q1 results continue to demonstrate our dominance in key markets and emerging opportunity in growth markets. The wave of change in system modernization and supply chain is underway, and businesses are actively investing in the tools they need to adapt to consumer expectations. As we look ahead, we are confident in our ability to seize market opportunity and presence in these rapidly growing markets around the world. And so in summary, I want to remind analysts and investors of our key themes for Fiscal 25. First, an emphasis on continuing to refine our SaaS software so it is easy to use and upgrade and even easier to recommend to peers. Second, a continued strategic partnership approach characterized by deeper and stronger alliances. This helps us tap into new opportunities and fuels our scalability around the world. Third, we are committed to harnessing the full potential of data to drive value and innovation. Across our solutions, our focus will be on leveraging data to enhance our offerings and generate greater customer value. With Rex Ahlstrom on board as our chief strategy officer, we are developing a path to advancing our data capabilities and maximizing their impact. As a final point, I'd like to stress across our markets, we'll continue to prioritize customer satisfaction and success. We have long stood by the philosophy of customers for life. A big part of that formula is to deliver value quickly, stay connected, and expand on the value delivered. With that, we will open the call for questions. Thank you.

Thank you, ladies and gentlemen. We will now begin the question and answer session. Should you have a question, please press star followed by the one on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the two. If you are using a speakerphone, please lift the hands up before pressing any keys. Your first question comes from Amir Azat with Ventum Capital Markets. Your line is now open.

I'm Peter Mark. Good morning. Thanks for taking my question. Good morning, Greg. Congrats on the continued expansion into pharma. I understand the market is largely greenfield, but I wonder... Are there any inorganic opportunities to accelerate your penetration, for instance, buying a point solution provider or another sort of software company, maybe a buy-side software? Well, we don't think so.

I mean, not that we haven't poked around, but as you say, it's so greenfield in terms of this approach to sort of running a completely centralized pharma, the CPSC. There's really nobody doing it. Over the last couple of years, we've now built out the platform to properly manage 340B and properly manage the daily distribution of drugs out to a site. You may have heard me say it before, but some of this just comes down to, for most hospital networks, when somebody checks into a ward, often sort of a week supply of the drugs they need are sent to them. And then, you know, two days later, it turns out they're already gone. And sort of five days of leftover drug is just sort of sit there and rot on the shelf. So with this approach, you know, it's really going to a, you know, not for Tylenol and that kind of thing, but for any of the more expensive drugs, we're literally set up to sort of run that supply chain end to end and deliver early morning every day, just what's needed that morning. and the savings are astronomical. But nobody else is really doing it. So it's a new ground, and I think we've just got to build it and sell it.

Fantastic. Then is it still early days, I guess, to talk about how that could expand your ARR per network? I know you always mention average ARR per network is like $3 million. Yes. and obviously not all networks will have pharma as a target, but can you maybe help us quantify where the ARR might go for networks where pharma is a target?

Yeah, and we haven't updated our slide on that, you know, the total ARR. But on average, like we're looking across sort of very large networks and medium and smaller networks and so on, and there's a wide variation in terms of how they adopt, how they deploy, you know, etc., But, you know, we think on average that it adds somewhere around a million bucks CAD to the ARR.

Fantastic. And that's just for the networks for pharma as a target as opposed to… Right. Okay. Right.

One of the things that's interesting with pharma while we're on the subject is it spreads across a much wider, you know, segment of the market. I mean, a lot of what we sell, we only go after networks that have a billion in net patient revenue or more. One of the things we're seeing now is even networks that go down to half a billion in revenue can still get some serious ROI from the pharmacy platform. So it may be that in pharmacy, the number of networks we're pursuing expands as well.

Oh, that's good, Keller. Mark, regarding your comments on professional services, yeah. you know, like nice uptick on the bookings and actually a very nice uptick over the last three quarters. But I just wonder, you know, like with more work being handled by implementation partners, how should we think about professional services revenues longer term? Do we sort of think it stabilizes around like 14, $15 million? Or could there be some upside eventually, just like big picture?

Yeah, I mean, super big picture there, Amar. I think we've hit on this before. We certainly expect that professional services revenue growth will be moderated because of those exact factors that you mentioned, among others. That said, we do see some growth there. We don't see it sort of flatlining. The business is going to grow, and we're always going to be playing You know, we think we're always going to be playing a key role in the real product-product side of our implementation processes, even as more broad professional services work in the implementation approach gets covered by service providers. So, you know, we don't see that, you know, in general decline. We don't really see it flatlining. You know, we see it growing. We just see it growing a lot more, obviously a lot less quickly than our main growth driver.

So we shouldn't read too much into the revenue line when we see the bookings go from 9 to 12 to 17 million on professional services.

No, I don't think so. I mean, it's about timing and the balance that a bigger backlog creates in terms of managing that implementation timing and some level of consistency on that delivery. But, yeah, I don't think you read that 17 and say, okay, well, that's going to translate. If it was 12 last quarter, that's going to pop quickly. That $5 million is going to pop into the, yeah. Fantastic.

Then maybe one last one on Rex Alstrom joining the company. Two things, like how did his hiring come about, and can you speak to the specific areas where you expect to see immediate impact or new initiatives under his leadership?

Yeah, I mean, you know, there are guys out there in the market where when they come available, you just hire them. And, you know, Rex is one of those guys that we've known sort of roundabout in the industry for a number of years. And when we learned he was on the market, we literally just sort of created a position for him. He brings a great deal of experience in basically monetizing data a combination of using AI, machine learning, et cetera, to create value for clients. And we're now at a point where we've got, you know, we have a massive amount of data residing in our public cloud infrastructure. Some of it contractually we're not allowed to use because our customers, you know, see it as very private data. So part of what Rex is working on is coming up with a value-added offering where he could go back to those clients and say, okay, if you will give us access to the data, this is how we'll anonymize it, this is how we'll make sure that the names and private information remains private, but this is the value you're going to get out of it. And we think there's a very compelling offering to take to our clients. Some of the stuff we were already working on, I mean, we've got a release coming out in October that is going to be using, you know, machine learning to present to a, you know, a VPS supply chain or an SVP supply chain, literally sort of what are the five metrics he needs to worry about today. So, you know, out of 60 or 70 metrics, it's going to be analyzing the whole network and sort of presenting them when he logs in in the morning with sort of, okay, forget the other 75. These are the five that you need to sweat about today, right? But there's a lot more we can do there. And so, you know, Rex is sort of learning our architecture, learning our market, and then putting together a strategy to take advantage of all that.

Fantastic. Congrats. Thanks. Thanks. Your next question comes from Gavin Fairweather with Cormark. Your line is now open.

Oh, hey, good morning. Thanks for taking my questions. Maybe just to start on the distribution business, given the green shoots that you've been seeing in the shifting competitive environment, I know you were planning on putting in a few more marketing dollars to generate top of funnel. Curious if that's really begun, is that ramping up and are you seeing a response in the pipeline?

Yeah, we're, we're happy with what we're seeing there so far. Um, you know, I mean, even to add a new account in that market in the summer quarter, summer quarter is usually pretty slow. Uh, but you know, we already added a new account in that market, uh, in the summer quarter and we've last several quarters, we've added a new account in that market every quarter. Uh, The competitive win-back we mentioned, too, was pretty interesting because that was one where it was a client that had been on an old acquired platform that we had a company that we acquired back in, I think, 2003. They'd been running that platform for years, and a couple of years ago, they decided it was time to modernize. So they went to market, looked at our newer offerings, looked at some of our competitors' newer offerings, and decided to make a change. As they got to know our competitors' offering in more detail, They end up deciding to shoot the project and come back and sign with us. So we love those kinds of stories. And so far, I would say in the last three, four years, we've had probably five or six of those people. It tends to happen, especially if companies have grown substantially. They first signed with us when they were a $50 million business, and now they're a $700 million business. And I think it's time to go with one of the bigger vendors. And, you know, after investing a lot of effort and in some cases a lot of money, they end up realizing that, you know, these bigger vendors are not really optimized for a high volume efficient supply chain. And so we end up winning them back. So we've won back. I think at this point we're running close to 90% of the ones that have sort of tried to move away from us and have now come back.

That's great to hear. And then maybe just to follow up on pharmacy, I think you said half a dozen customers live. I'm curious how many of your audience you'd be speaking to on this or how many being kind of qualified and put into the pipeline, any kind of color on how broad the conversations are would be helpful.

Yeah, I mean, it's across the board, right? I mean, there's so much money here that almost everyone is talking about it in some way, shape or form. Uh, what's harder to predict is, you know, when they'll actually move. Uh, but you know, we've got a, we've actually got a pharmacy event happening in California, uh, in, I think it's towards the end of this month. I think it is. Um, but you know, that, that brings together some pharmacy and supply chain leaders, uh, to sort of look at what all we're doing in pharmacy. Um, And, uh, you know, we're, we're pretty happy with the, with the turnout. We've got, uh, quite a number of networks from across the country that are heading out to Newport beach in California for, uh, you know, to hear the story, um, hear what we're doing here, the dollars and cents that'll be saved. Uh, and, uh, you know, the, the gain, I mean, it's, it's a, I mean, we emphasize dollars and cents because we're supply chain guys. But what the hospital networks are saying is, you know, it also impacts patient safety. So it really is a win-win. And, you know, we're seeing very, very broad interest. As I say, the question is how fast will they actually sign? So far, you know, we're seeing, you know, pretty much every quarter we're adding another pharmacy project. So we're pretty excited about where we're at.

Appreciate that. Maybe a couple for Mark. First, can we touch on SaaS revenue recognition? If I take your ARR exiting fiscal 24, I guess it would have implied a bit higher SaaS revenue than you posted in Q1. So are there some larger deals with maybe some longer go lives in the mix there?

Yeah, I think the thing that moves the timing there is in Q4, some of that business would have actually started revenue recognition in Q4. So you don't pick up net, you know, the whole increase in the subsequent quarter. So that's one dynamic in there, if you follow me. And the other dynamic is, you know, we do from time to time, you know, sign a deal and agree, you know, to start the SAS period a little bit down the road. So it might not start, you know, our typical is, you know, you sign it, you put it up on the public cloud infrastructure and you start recognizing revenue. we have some deals that we do that we agree to delay that start for three months or even a little bit longer than that. So that would have had a negative impact of that $8 million turning into one-to-one quarterly revenue recognition in Q1.

Okay, that's helpful. And then lastly for me on the guidance, you reiterated that for the year for high single-digit growth and and EBITDA margins as well, which is a tick above where you're operating and the key one. So is the read through that you have pretty good visibility towards top line acceleration and margin expansion throughout the course of the year?

Yeah, I mean, I think what we have there is we have this SaaS engine that's cooking and that gives us a lot of confidence and That's mostly recurring revenue, so what's going to happen this year is fairly well-baked. Don't get me wrong, we've got to sign business in Q2 that turns into Q3 and Q4 revenue. We have to sign business in Q3 that turns into Q4 revenue, but a lot of that stuff is pretty locked down. That's what we're laser-focused on. We think the professional services world, we've talked about that a little bit. kind of hard to call, but, you know, we do think that the future looks pretty good there for us on that front, given the state of the backlog and, you know, current view on project timing. I mean, hardware's always, you know, this one, Gavin, it's always tricky to call. You know, we had a $4 million quarter here in Q1. And, you know, last year we were at, you know, close to seven or over seven million each quarter. We're not going to be back at those levels. So, you know, what happens with hardware is sort of, you know, we have still some booking and delivery to manage, you know, in the back half of the year for sure. But those are the key dynamics that we thought through in reiterating that guidance.

Appreciate it. That's it for me. Thank you.

Sure. Thanks, Kevin.

Your next question comes from John Shaw with National Bank. Your line is now open.

Hey, good morning. Thanks for taking my question. So could you give us an update on the hospital spending environment? Because at the beginning of the year, it was kind of expected that hospitals in the U.S. will see stronger cash flow generation to support their capital expenditure project. Is that still the case?

Yeah, it seems to be very much the case. Like one of the deals we closed in Q1, for instance, was a deal that we had expected to close in December. And then at the last minute, the hospital board put, you know, all of that type of spending on hold. They'd come through calendar 23, running cash flow negative, and they just decided to put it on hold. But, you know, they went ahead and signed in Q1. You know, they're back to cash flow positive. Everything's sort of rolling along more positively. So we're seeing that pretty much across the board in, you know, in the U.S. healthcare space.

Okay, thanks. The hardware revenue represents a recent low, so just a modeling question. How much hardware revenue should we model going forward? Do you think the Q1 level is going to be a good benchmark?

Yeah, I mean, John, as you know, we don't provide specific revenue guidance on hardware, but... Like I said, last year we were at close to $7 million and over $7 million a quarter. We're not going to be at those levels for this year. That was the result of pent-up demand at the beginning of last year, a pretty large backlog that was a hangover from COVID-era chip shortages that flowed through our hardware revenue across last year. So, you know, I think, you know, if we read the tea leaves a little bit, you know, and I'll give you a real broad one here, John, it's somewhere between where we are in Q1 and where we were at the low point last year in a quarter. That's where the hardware revenue range is likely to be.

Okay, got it. Last question is, Peter, could you give us an update on your FedRAMP project?

Yeah, the FedRAMP project has kicked off. We actually have a pretty large government agency that has agreed to be our sponsor. That project also seems to be moving ahead nicely. Realistically, I think it will take us to sort of December of 25 to complete the full process. You know, it's one of those things where before you get into it, everyone tells you, yeah, it's about a year. Once you get into it, they'll admit, well, actually, it's more like 18 months. And so that project is underway. Many of the agencies, by the way, have been granted additional grace period because so many of the vendors are, it is taking all of us longer to get to true FedRAMP certification. And in the meantime, these government agencies still need solutions. So many of the agencies have been granted additional grace periods to run non-FedRAMP solutions as long as the vendor is en route to FedRAMP. So, you know, overall, we think it looks pretty good. I mean, it touches not only federal government agencies that we have as existing clients and that we have as prospects, but it also, and you probably know this, but it also touches a lot of the big state-owned hospital networks. that have decided to adopt either what's called TechRamp, which is really a version of FedRamp put out by the state of Texas, or FedRamp. And a lot of them are taking the position that you can be either. As long as you're either FedRamp or TechRamp, they can deploy your platform. So we're tracking pretty well, and we'll be ramping up investment in it. over the next, I mean, starting now, but it'll really ramp up through the year and probably reach sort of full investment level by Q4, Q1 of next year.

Thanks for the colors that pop along. Thanks, John.

Ladies and gentlemen, as a reminder, should you have a question, please press one, star one, sorry. Your next question comes from Sutan Sukumar. Your line is now open.

Good morning, gents. For my first question, I want to touch on the booking strength this quarter. Can you speak a little bit about where you see strength today? What was the mix between the different markets and how much of that is starting to be driven through the partner channel?

I think that's a Mark question.

Yeah, sure. So, Sutan, I think, you know, we had a good – we had actually a good mix across healthcare and complex distribution here. Healthcare, you know, slightly led the way, but a really solid performance from complex distribution in that mix. I think Peter mentioned in, you know, his comments, we had – You know, we did have a new logo in distribution, so pretty excited about that. And in healthcare, it was really a mix of, you know, some good expansion stuff and a pretty significant migration from an existing customer. So it was kind of, you know, a pretty good mix across the board.

Good. And then from a partner perspective, you know, where are partners playing – a more important role in terms of driving growth? Is it really in the healthcare space or really across the board?

Yeah, it's a mix, but definitely it's more important for us in the healthcare space. If you look at where the pipeline influence is from a dollar perspective, it's certainly tipped. It's certainly tipped towards healthcare. We have more SIs and larger SIs that have been involved with us in projects on that side. We do have some smaller SIs that are really very active with us on the complex distribution side. And actually, there's some of those in particular, one in particular that actually, you know, in terms of an end project delivery capacity is very far along the line. So that's kind of the mix of what we see from the partners and the level of influence there is, I think Peter mentioned his calling is about a third of the pipeline over the last 12 months has been influenced by partners. And when you look at win rates, you look at the deals that we actually win, the level of partner involvement in one deals is even higher. It's around 50%. Okay.

Okay, great. Good call there. On the data strategy. Um, you know, I think that's some encouraging commentary, just given some of the, the opportunities and some of the early traction that you're seeing there. Um, is this a net new area of investment for the company and, and, uh, or is it just sort of kind of a reallocation of existing spending? Uh, and how should we think about really the opportunity here? Is this, you know, is this really designed to be a product upsell opportunity or is there, um, Or is there an option if it's kind of a more broader product and services consulting type offering that you can take to your clients?

Sorry, you're referring to the data initiative?

Yes.

Yeah, I mean, we're seeing it as impacting several areas of the business. One is we think it'll impact new account win rate and general distribution. You know, there's a lot of hype these days about AI and AI capability and and how you're taking advantage of the data in the system to help decision makers sort of make key decisions. And we think this will be a very competitive new account offering. From the standpoint of how we roll it out, we're seeing it as a combination of an additional SaaS offering that would span right across our various verticals from from general distribution and even some of the healthcare distribution right over into the hospital space, including pharmacy, general supplies, etc. So it'll be a very broad-based approach. It will drive additional consulting. We expect, though, that our partners will pick up a lot of that consulting. It's a classic sort of kind of consulting that partners love to engage in and are well-equipped to engage in. So we expect to provide the platform, do some of the consulting, but have a good percentage of the consulting handled by partners. Okay.

Great. Okay, great. Thanks. And the – One last question for me, guys. On the healthcare side, can you give us an update on what you're seeing from a competitive standpoint? It looks like you guys are still competitively positioned here well. And just kind of curious on what you see in the backdrop. And with respect to expansions, really good commentary here on the pharmacy opportunity, but what does a typical expansion look like for for one of your healthcare networks? And how has that pace of expansion been playing out with some of the key market accounts that you've landed over the years?

Yeah, I mean, it's a great question. And it's, you know, there's no one simple answer to it. I mean, we, you know, we look for champions of change throughout the market. And, you know, we can't, you can't just sort of sell, you know, these various add-ons and upsells and cross-sells. You can't sell them to a network that doesn't want to change. So we tend to look for champions of change. There is a wave running through pharmacy right now as a lot of younger pharmacists are now sort of taking over as chief pharmacy officers. And they're not content with the way pharmacy has run for the last number of years. And so they're looking for platforms that can support change. So we're obviously all over that. In the general supplies area, We continue to have competition. I mean, Cardinal competes in the OR. GHX competes to some extent in general supplies. So we have competition in those areas, but we continue to be in a position where if a network really wants an end-to-end platform and says, well, you know what, maybe I'm starting in general supplies, but my long-term vision is to have a single platform that covers every type of supply chain within my network, then, you know, we're still the only game in town, and we continue to, in fact, deepen that moat. I mean, just rolling out pharmacies, another significant expansion of the moat, you know, protecting that space.

Okay, great. Thanks for the call, gents, and I'll pass the line. Thank you. Thanks, Lieutenant.

I know for the questions at this time, I will now turn the call over to Peter for closing remarks.

Great. Thank you, everyone, for joining us today and taking the time to get this update on Q1. We will look forward to talking to you with our Q2 results later in the fall. And in the meantime, if you have additional questions, as always, don't hesitate to reach out. Thanks and have a great day. Thanks.

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