Good morning, everyone, and welcome to Tecsys Second Quarter Fiscal 2022 Results Conference Call. Please note that the complete second quarter report, including MD&A and the financial statements, were filed on SEDAR 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 Thursday, December 2, 2021 at 8 A.M. Eastern Time. I would now like to turn the conference over to Mr. Peter Brereton, Chief Executive Officer of Tecsys. Please go ahead, sir.
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 of the second quarter of fiscal 2022, 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 two key indicators I'd like to highlight, which despite currency headwinds, are contributing to our track record of solid accelerated growth. Revenue, where I'd 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 improve 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.
I'd like to reiterate the growing importance of supply chain as a strategic lever within organizations and how this is being 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-19 disruption began, over 30 healthcare accounts have made major investments with Tecsys, helping to resolve operational shortcomings exposed by the pandemic. In September, we shared the news of the Australian retail chain and Woolworths Holdings subsidiary, Politix, having leveraged Tecsys software to manage the complex back-end supply chain processes behind their Salesforce technology.
In both cases, we are 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 are 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 demonstrate 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 are 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 31, 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. We're presenting hardware on a separate line, and this line likewise includes both proprietary and third-party hardware. 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 CAD 34.3 million, 12% higher than CAD 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%-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 CAD 5.1 million in Q2 last year to CAD 6.6 million in Q2 of 2022. On a constant currency basis, SaaS revenue was up about 36%. I also wanna 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 fiscal 2022, and we have 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 three years into our SaaS transition.
Maintenance and support revenue for the three months ended October 31, 2021 was CAD 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 31, 2021 was CAD 56.9 million, up 12% from CAD 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 CAD 13.1 million. That's up 11% from CAD 11.8 million reported for the same quarter last year.
Again, currency movements created headwind on revenue growth here, which would have been 17% on a constant currency basis. Hardware revenue in Q2 fiscal 2022 was CAD 5.4 million. That's an increase of CAD 2.0 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 CAD 4.0 million in Q2 2022 compared to Q2 of last year, which was CAD 2.7 million. SaaS bookings were highlighted by new customer signings in all our key verticals with three new hospital networks, four new general distribution retail customers, and some solid base business uptake as well.
Professional services bookings were healthy at CAD 17.9 million, comparing favorably to CAD 11.5 million in the same quarter last year. License bookings were CAD 1 million in the quarter compared to CAD 1.9 million in the same quarter last year. SaaS remaining performance obligation, also known as RPO or SaaS backlog, was CAD 72.7 million at the end of Q2 fiscal 2022. That's up 21% from CAD 60.2 million at the same time last year. On a constant currency basis, that growth was 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 CAD 33.1 million.
That's down about 16% compared to CAD 38.7 million at the same time last year, and down slightly from CAD 35.1 million at July 31, 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 CAD 15.5 million. That's down about CAD 0.5 million compared to CAD 16 million at 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 CAD 13.9 million. That's higher by CAD 1.3 million or 11% compared to CAD 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 CAD 0.7 million or CAD 0.05 earnings per basic and fully diluted share, compared to CAD 2.1 million in Q2 last year, which was CAD 0.14 per basic and fully diluted share. Adjusted EBITDA was CAD 3.2 million in Q2 2022, compared to CAD 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 CAD 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 CAD 67.5 million. That's up 15% compared to CAD 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 CAD 12.2 million. That's up 36% from CAD 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 CAD 1 million or CAD 0.07 per basic and CAD 0.06 per fully diluted share, compared to CAD 3.3 million or CAD 0.23 per basic and fully diluted share in the same period last year.
Adjusted EBITDA was CAD 5.7 million in the first six months of the current fiscal, compared to CAD 8.3 million for the same period last year. Foreign exchange movements had a negative impact of approximately CAD 3 million on profit and Adjusted EBITDA in the current six-month period compared to the same period last year. Finally, we ended the second quarter with a strong balance sheet position. At October 31, 2021, we had cash and cash equivalents and short-term investments of CAD 38.1 million. That compares to CAD 45.9 million at the end of the year. We had debt of CAD 9.0 million compared to CAD 9.6 million at the end of the year.
Cash provided by operations was CAD 0.6 million in Q2, and our DSOs or Days Sales Outstanding and accounts receivable remained 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 TSX 30. 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 TSX 30 with a three-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 are 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 enter the second half of fiscal 2022, we continue to feel confident that the remainder of 2022 is on a solid growth trajectory underscored by positive trends in our KPIs. While COVID may still present additional curveballs, 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 three 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 improved onboarding 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 and 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 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.
Thank you. If you would like to register a question, please press 1 followed by 4 on your telephone. You will hear a three-tone prompt to acknowledge your request. If your question has been answered and you would like to withdraw please press 1 and a 3. Our first question is from the line of Amr Ezzat with Echelon Partners. Please go ahead.
Peter, Mark, good morning, and congrats on another strong quarter.
Thanks.
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?
You know, hard to say. You know what I mean? We came through the you know the early and much more surprising and drastic phase of the pandemic, you know, relatively unscathed. We did see a slowdown in bookings, of course, for a few quarters there. It's hard to predict. You know, we're sort of watching this Omicron one to see you know how serious it turns out to be. We've certainly learned how to navigate around travel restrictions. You know, I think from a you know 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.
We don't anticipate a major hit there, but I mean, I think the whole world is trying to figure out what the next two weeks looks like, and I guess it could have some impact, certainly. You know, 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.
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, I mean, we continue to look for the right opportunities to buy a footprint in Europe, so that search continues. You know, I would say that as time has gone on and valuations have somewhat sort of stabilized, you know, it certainly looks like there may be some possibilities there. We're continuing to scratch at that. The other area we continue to look is in the U.S. area for you know, potential sort of, you know, small niche you know, healthcare components that could complement our suite. We continue to look at both. You know, Bertrand continues to build out a pipeline for both. Certainly at this point, you know, I would agree with your assessment.
Our focus and the focus of our management team is on growth. You know, the business at, you know, our current growth rates sort of, you know, doubles every few years and that demands a lot of focus to make that happen. 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. The ARR split is pretty similar to what it was last quarter. We're at about 35% healthcare and about 65% complex distribution.
Great. Thanks. I'll pass the line, and congrats again.
Thanks.
Our next question is from Gavin Fairweather with Cormark Securities. Please go ahead.
Oh, hey, good morning. I thought I'd start out on the IDNs that you added in Q2. Nice to see kinda three new logos coming on board. Maybe you can just discuss the profile of some of those new customers in terms of their size and whether they're thinking kinda end-to-end out of the gate or starting with point of views or a CSE.
Yeah, we actually had a sort of the full variety. Size-wise, these are all sort of, you know, medium-sized IDNs. They're part of the, you know, the 300 IDNs that we target in the upper end of the market. So they're, you know, they're all sort of good size networks. In terms of what they're, you know, purchasing, it literally ranges from, you know, one starting with a CSE and others starting, I believe the other two, if I remember correctly, are starting on the point-of-use side. But in every case, the intention is to go full end-to-end, but, you know, starting in a couple of segments of their businesses. They were all sort of pretty, you know, what we would see as sort of good average size IDNs.
As you know, Gavin, our average size footprint or average size deal has moved up pretty significantly in the last few years, and these ones sort of fit right into the current average.
That's great. Then maybe just a couple on the sales pipeline. I guess now you would be kind of through 50 in terms of the IDNs that you're working with, maybe in the low 50s. You have your hundreds target by fiscal 2025. I know that, you know, given that you have kinda longer sales cycles, I guess I'm curious kinda how many of, you know, you might have visibility on that are kind of thinking through kinda supply chain implementations over the next few years.
Yeah, I mean, you never know exactly. There's you know, there's changes that happen in these businesses. Sometimes there's changes on boards of directors that suddenly change focus or change of CEO that suddenly changes focus. But you know, from what we can see, we believe we know sort of where the you know, we have the names of what we think are the next 20 that we expect to come in over the next sort of year and a half or so. So we'll see how that plays out. But certainly, this market is accelerating you know, as we anticipated. I mean, it was starting to accelerate. The pandemic hit. It slowed down for a bit.
You know, it's back to a decent clip. You know, I mean, here we are still in pandemic, really, and yet in the first six months of the fiscal year, we've already signed five new networks. You know, we love the momentum that's building there. Certainly, we, you know, we think we know the names of the next 20 that'll be joining us.
That's great color. I guess I'm curious, how much interest are you seeing on SaaS migrations 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 increased appetite from the on-prem install base to move over?
We are. And probably, in some ways, more, a little bit more than we anticipated. We'll see how that unfolds. You know, our focus has been on new accounts and sort of driving the new account SaaS business first, feeling that our existing account base was sort of, you know, quite happy to continue to run their existing software on-prem and just upgrade from time to time and so on. You know, there's a lot of threats out there and a lot of companies are looking at, you know, with some of the ransomware issues happening and so on, are saying you know, "Hey, how fast can I get this stuff off my servers and into the public cloud and better protect it and so on.
We're seeing an uptick in interest in that. You're seeing it in the further dropping license fees. You know, I mean, license fees this last quarter down to $1 million. I mean, you know, Q2 is typically a fairly strong booking quarter for us. To have the, you know, license fees down another 50% from Q2 last year, it kinda tells that story. I mean, you know, the last year and a half or so, the license fees have largely come from the base. You know, the base is starting to shift into SaaS conversions as their path forward. You know, we think you'll continue to see sort of license fees driving closer and closer to zero. You know, the SaaS bookings are, you know, replacing that as that base starts to move.
That's great. Maybe one for Mark. The services gross margins, I guess, the first half of your fiscal year have kind of moved a little bit lower than where you were running kind of over the course of fiscal 2021. Can you just maybe disaggregate that into some underlying trends at play between you know building capacity for you know further ProServe delivery versus FX versus you know kind of the SaaS optimization that you guys are working on in the background?
Yeah. Yeah, on the services side, that's really a combination of those two factors. They're kind of impacting in equal parts. It's the FX impact, you know, on the mismatch we have on the revenue side in USD and the cost side in CAD. That's putting some pressure on the comp. The other thing, it's like I said, it's about, you know, roughly kind of a half and half impact. The other part of that is us sort of scaling up the business, you know, for growth and investment and delivery capacity.
Just on that last point, the last couple quarters you've been delivering around CAD 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 CAD 14 million, CAD 15 million, CAD 16 million in services in a quarter or is that kinda where we're gonna be heading in the next few quarters?
I would say in the next few quarters, yeah. You know, from what we're seeing and the trends we're seeing, you know, that's kinda where we're expecting this to go. We're growing head count in services. You'll recognize that, you know, last year we grew that team pretty significantly. The beginning part of this year, we've continued to grow that team, although at a slightly slower pace. That's not because necessarily we wanted to grow it more slowly, but it is a pretty competitive hiring environment, you know, that we're seeing now over the last, really over the last couple of quarters. We continue to recruit there and continue to build you know, team to support what we expect to be you know, continued increase in demand in services.
Awesome. Thanks so much. I'll pass along.
Our next question is from Nick Agostino with Laurentian Bank Securities. Please go ahead. Go ahead.
Peter, can you just speak to maybe the progress and conversations you're having when it comes to your pharma solution and your existing IDN base, 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 targets on the IDN side?
Yeah, it continues to be a relatively small portion. You know, a lot of pharmacy in the hospital space is still in a very traditional mindset. So we still see, you know, overall, I would say pharmacy is maybe 10% of the conversations that are happening with the networks right now. You know, we're actually fine with that. You know, we think over the next couple of years, we'll probably add a couple more, you know, pharmacy implementations. You know, as we sort of look at this over sort of the 5- 10-year horizon, we're sort of expecting, you know, 80%-90% of our bookings to come from the areas where we're already well established in. You know, CSD, cath lab, OR, nursing station, delivery, et cetera, with, you know, sort of 10%-20% coming from the pharmacy side.
Our expectation, though, is, as you get out to sort of years four and five, you know, pharmacy starts to become more significant. That's what we're working towards. We're continuing to invest in that. You know, we're looking to produce some documentation showing what the savings are that drives. You know, there's also, you know, we also need to continue to build up some of our own, you know, pharmacy expertise. We're working on that as well.
You spoke earlier about the sort of 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, are any of those conversations of a larger scale when it comes to SIs that you're engaging with? Just if you can highlight maybe partner contributions in the quarter, specifically on the three IDNs and maybe if they played any role on your distribution business.
Yeah. I mean, in terms of conversations with SIs, I mean, those continue. I mean, the funny thing is of course, the entire tech community is challenged with workload right now. So the, you know, by and large, the SIs are not looking to create sort of brand new partnerships, but what they are looking to do is satisfy their existing clients. When their existing clients develop a need, you know, they end up sort of looking around the marketplace to figure out, you know, who to work with for that particular need. So we are seeing that, you know, most sort of actively in healthcare. You know, this past quarter, I don't honestly remember. It was either one or two of them.
I'm mixing it up with first quarter in my mind here, but out of the five we've signed so far this year, two of them were brought to us by partners. You know, that's obviously a significant factor in continuing to expand our market presence. The beauty, of course then, is 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. 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 sort of 15 or 20 clients of their own that they work with extensively over a period of time to implement various solutions. You know, we've got a couple of those now. You know, our Jamie O'Halloran, who heads up our, you know, our partner initiative, that's something that he's working on quite extensively, is building out that particular piece of the, you know, the ecosystem.
You know, when we look at the next sort of four or five years, we can see that that whole general distribution space is, you know, beginning to go into a technology renewal phase, replacing these sort of 20-year-old systems that were put in for Y2K. In many cases, they rely on, you know, consultants that they know to guide them as to which system to look at. Building out our presence in that ecosystem is, you know, critically important to being, you know, 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 to be partner influenced.
Okay. Maybe just one last one from me. Obviously, three IDN wins this quarter, if I recall, probably towards the top end of what you guys have done historically. These are three IDN wins. Is that because of some of those legal bottlenecks that we saw last quarter, so maybe months built into the order? Or are you starting to see that snowball effect and momentum really accelerating sales cycle on the healthcare side improving, and if so, maybe comment on the sales cycle. I think last quarter you suggested that you might not need to grow out your sales force as big as you originally thought to go after the full, I guess, 100 IDN in the next 3- 4 years. Do you still stand by that given the performance this quarter?
Yeah, I mean, the rate at which we're signing new IDNs, first of all is, you know, I think there is a little bit of a catch-up that's happened there as we've sort of got through some of those procurement bottlenecks. You know, at the same time, when I look at the pipeline, the pipeline is extremely active and there's you know a greater number of opportunities in the short term pipeline than you know than frankly we've ever seen. 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, you know, if I take, for instance, the first half of the year, we closed five in the first half of the year. Can we do five in the second half of the year? You know, from what I can see in the pipeline, it certainly looks like we can. So it feels like that's a fairly normal run rate at this point. You know, contributing factor, the whole market is moving more quickly.
There's a lot more focus at a board level throughout, I mean, not only the hospital market, the general business market, but specifically within hospitals. You know, supply chain management is suddenly a board level issue coming out of the pandemic. So that, I think that's putting some heat under it. Then add to that the fact that, you know, our healthcare sales team is twice the size that it's been, you know, 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, you know, 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. You know, 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, you know, we're gonna let this initial investment in healthcare sort of mature for a bit on the sales 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.
I would just add to that we, you know, with the pretty significant investment that we made in the sales team up until this point of time, you know, we are starting to see some of the productivity starting to improve with these, you know, these folks that have been around now for, you know, a number of quarters, have had time to way into the markets and, you know the product, know the way forward, and have had time to sort of start doing some selling. We're starting to see the, you know, the productivity impact of that existing sales team. We also believe that, you know, there's more productivity to come here. We're kind of on the front end of that improvement.
Thanks, guys.
Our next question is from Andy Nguyen with Raymond James. Please go ahead.
Thank you, guys. Today, I just wanna touch on the free cash flow generations for the first half. I know as we turned into positive, actually, cash flow from operations turned positive this quarter, but still a bit underwhelming. Could you know, please touch on that? Like, you know, give us some more color as to what's going on in the background.
Sure. Yeah. I mean, we expect, you know, 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. That's, you know, that's pretty normative for us. You know, in the short term, our expectation is to continue to invest to grow the business, but to remain profitable. That operating cash flow, you know, positive operating cash flow at some level is kind of our expectation, but we're not right now looking to drive that number up. We're looking to invest in the business to, you know, to capture what we believe is very significant, you know, growth opportunity.
We do, as you would've seen, you know, we just declared a dividend of CAD 0.07 per share that's gonna be paid in January. That follows a pretty long trend of paying out dividends, which you'd sort of expect to continue in general. Then finally, in terms of CapEx, you know, if you look at CapEx, we spend less than 2% of our revenue here. That's what we sort of expect or what we'd see in the near term. I think, you know, as the business scales up over time, we're not a capital-intensive type of business, so, you know, I think that number as a percentage of revenue, you know, eventually goes down over time. That's kind of the picture.
Gotcha. Thank you. I'll pass it along.
As a reminder, if you would like to register for a question, please press the 1 followed by the 4. Our next question is from John Shao with National Bank Financial. Please go ahead.
Hey, good morning, guys. I just have a question on the hardware revenue growth. I know on a year-over-year basis it's quite strong, but if you compare to last quarter, it dipped a little bit. Is that just seasonality or just because of issues by your hardware providers? Did you see any challenges sourcing the hardware in the past quarter?
Yeah. John, that question is on-
Hey, John.
- hardware revenue?
Sorry, it's on hardware revenue. Yep.
Yeah. Right. Yeah. That's a pretty lumpy one for us, John. I think it was, you know, it sort of tipped down a little bit, but it's still been at pretty robust. You know, for us historically, there are still pretty robust levels of hardware going on here. Those deliveries are happening. You know, we continue to book a reasonable amount of hardware. We had a pretty big backlog, you know, coming into the year. You know, kinda what does the future look like there? I mean, we still have very significant hardware backlog.
We are, on the other hand, we're starting to see the impacts of. Well, not sort of starting to see, but we're dealing with some supply chain issues in some areas of our hardware delivery business. That can have an impact on sort of, you know, short-term, you know, volatility on delivery timing and things like that. You know, these kind of hardware levels that we've seen in the last couple of quarters, we've got backlog to support, you know, the continuation of that kind of level in general for the next quarter or two.
Okay, thanks. My other question is on the investment in your growth initiatives. I think it's now almost been two quarters since those investments were started. Now, if you look back, how would you summarize the return on investment so far, or is it still too early to tell?
Are you referring to investment in sort of sales and marketing or were you referring more sort of across the board investments in growth?
In the sales and marketing.
Sales and marketing? Yeah. I mean, if you look at bookings this past quarter, you know, we booked, you know, CAD 4 million of SaaS, you know, plus CAD 1 million of license. If in currency adjusted terms, I mean, that was actually the second highest SaaS booking quarter ever. In currency adjusted terms, it was actually the highest SaaS booking quarter ever. We feel like we're, you know, the investment is paying off. We invested in marketing early and then sort of, you know, brought on the investment in the sales team to take advantage of the additional lead gen and demand gen created by the marketing push. We feel like it's paying off.
I mean, we're not only seeing the rise in bookings in this most recent quarter, but you know, as I mentioned earlier, we're seeing a very strong pipeline. We're pleased to see that the new account members that have joined the team in the last 12-18 months, they are on the board and contributing deals. I mean, to me, that's always one of the questions. You know, we've been in this business a long time. When you grow the sales team, you always have to ask yourself, are you just spreading the same results over more people? Are you actually getting more results? From what we're seeing, no, it's actually driving more results.
The pipeline is moving more quickly and, you know, the new guys are getting on the board. Meanwhile, the existing team is continuing to contribute. I mean, I think it's kind of an interesting time period we're coming into now as 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 such that, you know, every new account that joins us now brings with it substantial expansion opportunity. Which, you know, for those of you that have followed us for a while, you would know that on the general distribution side, that didn't used to be the case. Typically, that we were dealing with smaller companies and sort of once you'd sold them, you were, you know, one... It was one and done.
That's no longer the case. The typical accounts we're signing now across the different markets are all much more substantial with good expansion opportunities inside them, post initial deal. It certainly looks like it's paying off. We're pretty pleased with how it's going. Our investment from here, you know, we are continuing to invest more in building out our cloud team and cloud capabilities. You know, that's putting some weight on some of the cloud margins in the short term. The cloud revenues, the SaaS revenues are scaling up so quickly, you know, we think that'll normalize again pretty soon.
Thanks. I'll pass the line.
Thanks.
Mr. Brereton, it appears we have no further questions at this time. You may continue with your presentation or closing remarks.
Thank you. That concludes the question and answer session. 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 a call. Goodbye for now, and we'll look forward to talking to you again next quarter. Thanks.
Thanks.
That does conclude the conference call for today. We thank you all for your participation and kindly ask that you please disconnect your lines. Have a great day, everyone.