Tecsys Inc
TSX:TCS
Earnings Call Analysis
Q3-2024 Analysis
Tecsys Inc
The company has demonstrated a robust financial position, holding CAD 33.2 million in cash and short-term investments with zero debt on the books, reflecting a solid fiscal foundation. Q3 net cash contributed by operating activities amounted to CAD 2.3 million. Even as it strengthens its financials, the company remains committed to shareholder returns, having repurchased CAD 1.5 million worth of shares and announcing a quarterly dividend of CAD 0.08 per share.
Looking forward, the company has refined its full-year 2024 projections, honing in on total revenue growth estimated between 11% and 14%, with a notably bullish outlook on SaaS revenue growth, now expected to reach 37% to 38%. Moreover, adjusted EBITDA margin predictions have been focused to a range of 5% to 6%, signaling an anticipation of improved profitability in the short term.
Continuing its trajectory of stable growth through Q3 of fiscal 2024, Tecsys is leveraging its strong balance sheet, sales pipeline, and customer interest to reinforce its market presence. The healthcare sector's ongoing expansion and the convergence of distribution and retail operations represent significant business opportunities. The company prioritizes customer success by evolving its SaaS model, forming strategic partnerships, and innovating within its healthcare and omnichannel distribution platforms.
In the wake of the pandemic, the company reassessed its business model, identifying areas of over and underinvestment. They are now making calculated strategic investments to adapt and thrive in the 'new normal,' with an aim to balance growth objectives with the evolved needs stemming from the pandemic's aftermath.
The company underwent restructuring, resulting in anticipated annualized savings of CAD 4.6 million. Investors can expect to see two-thirds of these savings reflected in Q4 results, as the changes were implemented in February, with full benefits appearing from Q1 onwards.
The fiscal 2025 EBITDA guidance is set for a revision in the next quarter. This will occur post-budget review, incorporating new strategic investment areas. While the guidance remains unchanged for the moment, there's an implication of upward bias hinted at by the company's executives.
Professional services are on track for a recovery, which is a typical pattern after a seasonal dip. This standard trajectory is associated with the timing of large project start-ups and completions, with full-scale benefits not materializing until the later stages of project development. Thus, the anticipated improvement in this area is characteristically gradual rather than immediate.
The company's current priority chalks out a clear preference for organic growth, focusing on expanding SaaS revenue, gross margin, and EBITDA organically rather than engaging actively in mergers and acquisitions (M&A). This strategy underlines the company's confidence in its organic market activity and growth potential, suggesting a robust future growth trajectory driven by internal capabilities.
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Good morning, everyone. Welcome to Tecsys' Third Quarter Fiscal Year 2024 Results Conference Call. Please note that the complete quarter report, including MD&A and financial statements were filed on SEDAR+ after market close 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 call, which is available on the website at www.tecsys.com/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 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, March 1, 2024, at 8:30 a.m. Eastern time.
I would like now to turn the call over to Mr. Peter Brereton, Chief Executive Officer at Tecsys. Please go ahead, sir.
Thank you. Good morning, everyone. Joining me today is Mark Bentler, our Chief Financial Officer, and we appreciate you joining us for today's call. As our results posted yesterday highlight, our company has maintained a solid trajectory of growth this quarter with a 48% increase in our SaaS revenue stream year-over-year, which Mark will elaborate on in a few minutes. We achieved CAD 4.9 million in SaaS bookings for the quarter, marking our most successful quarter this fiscal year so far.
Despite a year-over-year decline due to a lumpiness in post-COVID bookings last year, we are encouraged by the positive in-year trend. Our RPO has seen a steady rise, up 23% compared to the same time last year. We've also expanded our customer base, adding 5 new logos in the quarter and securing new business in the United States, Canada, Europe and the Middle East. This includes 3 new health systems, major SaaS migrations and a healthy mix of business across key verticals, underscoring our diversified capacity for sustained growth.
I'd like to share some key highlights in Q3 and some context on how we see them supporting value creation. If you're following along on our companion presentation, I'll be speaking to Slide 3. First and foremost, we are seeing an across-the-board pick up in new business and buyer intent spanning diverse markets. Health care providers, video game distributors, online pharmacies, cosmetics retailers and farm supply dealers have all invested in our platform in the quarter. This diversity is evidence of the growing awareness that modern supply chain demands modern technology.
In retail, our market position and presence continues to strengthen. We signed U.S.-based retailer that was Ranch and Home, we've expanded our business with a global cosmetics retailer in a multi-company -- sorry, multi-country expansion and we extend our business with Crunchyroll, a Sony subsidiary.
In health care, we continue to experience excellent momentum, despite a general slowdown in the industry these past few years, with many hospitals experiencing negative cash flow until late 2023. Most are now cash flow positive. We're seeing a rise in activity in our health care business.
In addition to migration and expansion business at existing health care customers, we welcomed 3 new health systems to our roster, among them a marquee name in the U.S. As we've noted in the past, every new logo carries years, if not decades of expanding base account activity. Speaking of marquee names this quarter, we secured a significant expansion at Roche, one of the world's largest health care diagnostic companies with operations in more than 100 countries.
This new business bolsters our international presence and cements are standing as a key player in the global market. It also emphasizes the extensive capabilities of our solutions and handling the highly complex regulatory challenges of global logistics.
As we have discussed in previous quarters and outlined in our guidance, we're committed to ongoing margin expansion. This quarter, our record revenue growth and operational efficiency improvements have positively influenced our profitability metrics. On top of that, early into Q4, we initiated a strategic restructuring to bolster our long-term profitability.
Following the end of our Q3 and prior to the final approval of the financial statements, we reduced our workforce by about 4% across several departments which, following severance costs of approximately CAD 2.3 million, is anticipated to yield annual operating cost savings of approximately CAD 4.6 million. Additionally, we are committed to strategically investing in areas with high growth potential to not only increase revenue, but also to strengthen our competitive position in the markets we serve.
Turning briefly to our leadership in the market. I'd like to take a moment to highlight some recent initiatives we have undertaken around market engagement since the Tecsys user conference last quarter. As an example, we have proactively capitalized on substantial growth opportunities in the perioperative space, the pharmacy sector and other subverticals to strengthen our market presence. Building on the strong partner engagement and customer enthusiasm from our user conference, we've initiated a series of regional events targeting these subverticals, including workshops and thought leadership forms.
Partners, customers and prospects have been coming together for learning and relationship building, while viewing Tecsys as a leading resource as they modernize their supply chain technology. This strategy is showing early signs of having a positive impact on our pipeline, which remains robust heading into Q4.
I'll now hand it over to Mark to provide further details on our third quarter financial results as well as financial guidance on several key metrics.
Thanks, Peter. We're very pleased with the record performance in our third quarter ended January 31, 2024. I'll start with Slide 4 and focus first on SaaS. SaaS continues to be the key driver for our growth, and we believe the key driver for value creation. SaaS revenue growth is driving our recurring revenue. And during the third quarter, our recurring revenue was 52% of total revenue and 63% of total non-hardware revenue. We reported SaaS revenue growth in Q3 of fiscal 2024 was 48%, reaching CAD 14.2 million in the quarter.
That 48% growth number was stellar, but it was also helped by about 3 percentage points of tailwind from foreign exchange and about 7 percentage points of tailwind from onetime recognition of deferred revenue related to the completion of a product performance obligation. This was also called out in our MD&A. I just wanted to highlight those points to help you triangulate our year-to-date reported SaaS revenue growth number of 43% to our revised slightly upward SaaS revenue guidance range for the full year of 37% to 38%. I'll speak a bit more about our financial guidance in a moment.
Total revenue for the quarter was a record CAD 43.8 million. That's 13% higher than the same period last year. On a constant currency basis, total revenue growth was 10%. I'm going to come back to professional services revenue on the next slide. But first, I want to point out the significant decline here in license revenue, which was down about CAD 0.7 million compared to Q3 of last year. This is really the back end of our transition to SaaS and soon we'll have very little comparative adjusted EBITDA drag from license revenue.
For the third quarter, gross margin was 45% compared to 44% in the same period last year. Combined SaaS, maintenance, support and professional services gross profit for the 3 months ended January 31, 2024, was 48%. That's up compared to 47% in the same period of fiscal '23. SaaS margin expansion was the driver and we're pleased to report that this continues to track as planned.
Net profit in the quarter was relatively flat at CAD 759,000 compared to CAD 888,000 in the same quarter last year. Adjusted EBITDA was CAD 2.6 million in Q3 of fiscal '24 compared to CAD 2.8 million in the same period last year. Relative to the third quarter of fiscal '23, despite solid growth in our SaaS business, lower professional services and license revenue negatively impacted current quarter profitability, which is a good transition to Slide 5.
Professional services revenue for the third quarter was CAD 13.0 million. That was actually down 4% from CAD 13.6 million reported for the same quarter last year and up only slightly on a sequential basis from Q2. Professional services backlog continues to be strong at CAD 36.7 million at January 31, 2024. As we indicated last quarter, we expect professional services revenue to tick up sequentially in Q4 as we see project activity increasing.
Turning now briefly to our results for the first 9 months of our fiscal year 2024. Our total revenue was CAD 127.3 million. That's up 14% compared to CAD 111.2 million in the same period last year, and that's up 11% on a constant currency basis. SaaS revenue for the first 9 months of fiscal '24 was CAD 37.7 million. That's up 43% from CAD 26.3 million in the same period last year, and up 39% on a constant currency basis.
Our adjusted EBITDA for the first 9 months of fiscal '24 was CAD 6.8 million compared to CAD 7.0 million in the same period last year. Basic and fully diluted earnings per share were CAD 0.11 in the first 9 months of both fiscal '24 and fiscal '23. We ended Q3 fiscal 2024 with a solid balance sheet position. We had cash and short-term investments of CAD 33.2 million and no debt. Q3 net cash provided by operating activities was CAD 2.3 million. And during the quarter, we used CAD 1.5 million to repurchase shares under our NCIB. Additionally, the Board yesterday approved a quarterly dividend of CAD 0.08 a share.
Well, with respect to financial guidance and now moving to Slide 6, based on our Q3 results and our Q4 outlook, we are revising full year 2024 guidance to, #1, tighten the range on total revenue growth to between 11% and 14%; #2, tighten the range and increase the high end of SaaS revenue growth to between 37% and 38%; and #3, tighten the range on short-term adjusted EBITDA margin to between 5% and 6%. We expect to provide updated guidance for fiscal 2025 as part of our Q4 and full year fiscal 2024 earnings call.
I'll now turn the call back to Peter to provide some outlook comments.
Thanks, Mark. On a -- over on Slide 7, which I'll now be walking through. You can see that Tecsys stable growth continues through the third quarter of fiscal 2024 with a strong balance sheet, a solid backlog and a strong sales pipeline. As mentioned earlier, our target markets are showing widespread buyer intent, and we have a highly capable sales team with the tools and talent to capitalize on a market that's ready to invest in new technology.
Our expanded health care offering and growing footprint gives us confidence that the health care sector will continue to serve as an important growth engine for us. Our converging distribution and retail business presents a significant market opportunity.
We continue to refine our sweet spot and position ourselves for market share growth amidst shifting supply chain dynamics, which are driven by factors like aging legacy systems, digital adoption and a realization that heightened consumer expectations are here to stay.
In summary, I want to remind analysts and investors of some key themes for fiscal '24 and beyond. First, a sustained commitment to our expanding SaaS revenue model, which will drive changes in the way we deploy solutions and delight customers. 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, an emphasis on advancing and deepening our health care vertical, covering both MedSurg and Pharma. We continue to solidify our position as the go-to provider for health care supply chain solutions. Lastly, a continuous evolution of our distribution and omnichannel business platform that takes advantage of innovative technologies and the power of data.
As a final point, I'd like to stress across our markets, we'll continue to focus on customer success. We have long stood by the philosophy of customers for life. A big part of that formula is to deliver value quickly, build trust with our customers, stay connected and expand on the value delivered.
With that, we'll open the call up for questions. Thank you.
[Operator Instructions] Our first question comes from Amr Ezzat with Echelon Wealth Partners.
I appreciate your comments on the restructuring, but can you elaborate on these factors that drove that decision? It seems like your comments on the macro are pretty rosy. So I wonder, are you seeing some of that strength based in fiscal '25?
No, we're not. We came through -- I mean, to some extent, this was a matter of analyzing the business now that we feel that we're sort of the pandemic is totally behind us. I mean, as you know, our various industries were very substantively affected by the pandemic. The -- I mean health care was majorly distracted, general distribution was having issues with factory supply and shipping containers and labor and all kinds of things and retail was of course, massively sideswiped.
So there was a lot of things we continue to sort of invest in over the last few years, while we tried to ascertain sort of what the post-COVID world was going to look like. As we come out the other side of that, we now feel we're just playing into the new normal. And we did a review of the entire business from one end to the other and decided where we were sort of over investing for the new world and where we were -- and we've also identified some areas where we're underinvesting, frankly. So we made the decision to make those change.
They're never easy changes to make. But we felt like it was the right thing to do to get the business in absolute sort of best fighting for the new environment we find ourselves in. There is areas -- I mean, we don't see any sort of exceptionally large areas of investment, but you will continue to see over the next few quarters, you'll continue to see us invest in key strategic areas as we continue to invest for growth.
Fantastic. Then if I were to think about the pace of realizing the CAD 4.6 million on an annualized savings, do we see the full impact of that starting in fiscal Q1?
Yes, you'll -- I mean, you'll see the restructuring charge hit Q4. You'll also pick up, call it, 2 of the 3 months of benefit hitting Q4 because the changes were made in February. And then all of that, of course, full benefit, of course, hitting in Q1.
Fantastic. Then you haven't updated your fiscal '25 EBITDA guidance, like post restructuring. Is that a measure of you guys being conservative? Or should we look for an update next quarter?
I'll let Mark take that one.
Yes, we're going to update that next quarter. We're expecting to kind of review through our budget cycle. And as Peter mentioned, there are some investment areas that we -- that we'll make. But our intention was very, very clearly to not mess with that guidance right now, but address it after we report our Q4 results.
Perfect. And it's safe to assume there's an upward bias, right?
I would expect.
Okay. Shifting gears to professional services, I mean, I know fiscal Q3 experiences like that seasonal dip but I think we're all hoping for a bit of a rebound from the previous quarter. Like we'll see it next quarter, it seems like, but can you outline the dynamics at play there? And am I right to assume that you guys out of thoughts that we get a bit of a rebound like this quarter sequentially?
Amr, I know that a lot of the analysts thought we'd see a quick rebound in Q3. I think I actually mentioned in the Q2 call. It's typically when these slowdowns happen, it takes a couple of quarters to rebuild and it's following a totally normal trajectory. This seems to happen every few years. We end up with a bunch of large projects that end and some new large projects that are starting and you sort of get into this -- putting [ this valley ] in between. But the thing is in the early stages of a large project, you don't have that many resources deployed yet. You're sort of doing your process confirmation workshops and that kind of thing and nailing down exactly how this stuff should be deployed, but you're not getting to the full-blown full team effort. So it's -- honestly, it's -- and I think we didn't explain that clearly enough in the Q2 -- because we seem to have left some confusion out there, so I apologize for that. But it's actually following a pretty normal trajectory.
It dropped off in Q2. It's -- we're seeing all the sort of the new projects starting to kick in, in Q3. So you see a slight uptick in Q3. And we expect to be back to a more normal run rate going forward.
Fantastic. Then maybe one last one for me. Can you give us an update on the capital allocation strategy and what you guys are seeing in terms of like M&A and valuations and how that's evolving?
Yes. I mean our focus at this point is organic. We feel like we've spent enough time poking at M&A, and it's not like we don't continue to be opportunistic. And if we see some great opportunities, we would certainly take a look at them. But our -- at this point, we see a lot of activity in our markets. And our focus is very much on driving towards rapid organic SaaS revenue expansion, SaaS gross margin expansion and EBITDA expansion. And we see all of those on the horizon.
And honestly, the organic picture has never looked better. We're very excited about what we're seeing. And we're -- for the time being, we're keeping our focus on that.
Fantastic. Congrats on the quarter.
Our next question comes from Andy Nguyen with Raymond James.
Just a follow-up on the workforce reductions. Can you elaborate on what area was experiencing the headcount reduction? What division?
Yes, we're not actually specifying that generally in the market. There's -- from a -- standpoint, that would probably not be a good thing for us to do. But it's -- we can just tell you that it was done selectively. It was done based on the skill sets that we think we need going forward and the areas where we thought we had perhaps a little too much skill set.
Some of the people we were able to redeploy in other areas of the business. We did that where it was possible. And where it was not possible, they left the organization. But we're not getting specifically into which particular product lines were touched more than others.
Got you. No worries. And my other question is we will be surrounding the SaaS ARR bookings. And I know it's lumpy over quarter-over-quarter and it's actually up sequentially. But on a trailing 12-month basis, it's actually down. So how much should we read into this?
I think what -- I mean, our read into it, and we can all sort of read it differently, our read into it is that the cash -- the negative cash flow experienced by almost all U.S.-based hospital networks throughout calendar 2023 definitely had a short-term slowdown on the -- on our growth and booking rate in that market. It continue to perform. We continue to add new networks. We continue to drive new opportunities within the base, et cetera. But overall, we think it create a little bit of slowdown.
It is comparing, as we mentioned in the prepared remarks, it is comparing to a very weird lumpy period. So it's a little bit hard to compare. Like if you look back over the last few years, we did -- I mean, go back, I think, 3 years or might be 4 by now, but I think it was 3, we did like CAD 8.8 million in SaaS bookings and then we did like CAD 9.5 million, and then we did CAD 12 million and then we jumped to 16-point-something.
And those sort of lumpy jumps were also driven just by timing as the whole pandemic sped up and slowed down and distracted the market and then let up again and so on. So it's made for a very weird comparables. But still, if I come back to sort of a trailing 12 versus prior trailing 12, you are mainly comparing calendar '23 to calendar '22. And calendar '23, the American hospital community, by and large, ran cash flow negative and began holding back on their spending.
We had a number of projects that even right up into the tail end of the calendar year, where it was sort of all system to go until it got to the final finance committee who just said, no, we're too cash flow negative. We're going to hold off on that project for now. So we've continued to see that the hospital community, by and large, moved to cash flow positive starting in about November.
And -- I mean you can get that out of Becker's report or there's other industry publications out there where you can see that wherein the whole industry shifted back to cash flow positive as sort of elective surgeries picked up again and everything kind of returned to normal.
So we're now feeling an accelerated pipeline momentum as we head into our -- as we're now in our fourth quarter of our fiscal year and heading into fiscal '25. So we're feeling good about where it's at. But there's no question there was definitely some suppression, calendar '23 versus calendar '22.
Our next question comes from Gavin Fairweather with Cormark Securities.
Maybe just to compare that on the distribution business. I know you've kind of soft circled the fall as the time line, when some of your pipeline activity start to translate into bookings. I know you called out a few kind of impressive new logos this quarter. So maybe just give us an update on how that business is trending and maybe you think you can build upon this momentum in the quarters ahead.
We think we can. I mean there is no question, health care it has taken a lot of our attention over the last few years. But in the meantime, the general distribution market is picking up speed again. As you mentioned, Gavin, we saw an increase in the pipeline. We saw an increase in pipeline activity. And then this quarter, we finally began to see some new accounts start to sign and move into our customer base. There's good opportunities in that market. And the competitive landscape has actually shifted quite a bit. I don't want to get into sort of speaking specifically about some of our competitors or former competitors here on this call, but there's a number of significant players in that market that, as a result of acquisitions, merger activity, et cetera, have really refocused away from the market that we generally compete in. So we're finding it to be a more open market space as well.
So not only is it more active with the sort of business, by and large, returning to normal, but the competitive landscape has actually opened up somewhat as well. So we're in our sort of annual planning cycle right now for fiscal '25. And one of the decisions that we've got to make is sort of how much to turn up the investment on that market because it's definitely becoming a more interesting in active market.
Are you seeing win rates perking up?
No, I would say not yet. I would say our win rate is remaining somewhat constant. At the same time, our -- there's just more deals starting to go down. So it certainly looks like it -- our wins will -- our number of wins will probably move up. But now win rate at this point is remaining relatively constant, but we do think there are some things we can do there to improve that win rate. So we're looking at that now.
I would just add to that, Gavin, that -- I would just add to that, Gavin, that it was pretty good -- I mean 1 quarter does not a trend make, but it was a pretty solid booking quarter for that part of our business. And one of the things that made it pretty interesting, I mean, we booked new logos in there, we booked expansion deals in there, and we booked a pretty big migration deal in there. And over the last couple of quarters, we've seen some migrations in that part of the business.
And of course, as you all know, we've got a bunch of ARR that's legacy maintenance and support ARR on that side of the complex distribution business. And it's just interesting to see that starting to -- what feels like starting to pick up on the migration side.
Yes, I appreciate that. Good to hear. Maybe shifting gears to health care. I'm curious if you can update us on how many of your audience have bought pharmacy today? I still think that it's probably still early days in a modest number, but I'd be curious for your thoughts on just now that you have more of the data and the white papers and calculations around savings, how many of your customers do you think could bide in the next 3 years?
Believe me, we would love to know the answer to that question. We are seeing a lot of interest. We actually, yesterday, ran a sort of a thought leadership meeting down in Dallas, where we invited health care providers to send their pharmacy leadership teams over to -- for a day of discussion of what we're doing and what's happening in the market and the opportunities there, not counting our folks, just counting customer folks. We had over 40 people show up for that. We'd have been happy with 12. So we had some very good attendance.
So the interest there continues to rise as we get sort of more and more data and can prove out sort of the savings there. So -- I mean it's different than, for instance, the CSC work we do, the consolidated service center work we do. I mean that model only applies to maybe half, maybe 60% of the market. Because in some markets across the U.S., it doesn't make sense to run your own consolidated service center. So that particular offering is sort of only really applies to a smaller slice of the market.
But pharmacy, it's everybody. I mean there's nobody that doesn't -- couldn't save millions of dollars and improve the quality and consistency of their care by implementing a good pharma platform. So we're pretty excited with where that's at. How many we can win over the next 3 years, I think that's the good question. Some of that's going to depend on sort of how rapidly some of the current projects underway achieved success. I think there's a lot of eyeballs watching those projects to see how quickly they achieve their objectives. But certainly, it's looking like it's a wide open opportunity for us.
Can you remind me how much of that market is [indiscernible] look, I think [indiscernible] has a point solutions for that, but how many of the alliance have nothing in place?
Yes, it is largely greenfield because -- and it's not that we don't overlap a bit with point solutions. I mean there are solutions that are focused really on the pharmacy buy side that are in essence sort of drug portals to help hospital networks buy the drugs they need. And there's other solutions that are sort of dispensing cabinets and hardware to manage the drugs and sort of try to at least make sure that you're only sort of spitting out the drugs to the right clinician with the right authorization for the right patients, et cetera.
But we seem to be, at this point, be the only player in the market that is again offering an end-to-end platform. It goes all the way from forecasting and demand planning through the deferment process to the receiving, managing a central pharmacy with 340B price management, which that alone just that -- 340B price management thing is worth millions. And then just in time dispensing into various hospital locations and rent rate to the patient bedside.
So nobody else is covering that whole end-to-end picture. And I think that's really why we're starting to see the kind of momentum building in this market that we're seeing.
Great to hear. And then just lastly for me on the partner side. I appreciate your comments around big implementation timing sets quarter-to-quarter. But I am curious how much more of a service allowed is being taken on by implementation partners?
And then secondly, on the partner side, maybe you can touch on Oracle. I think previously, you alluded to maybe shifting of the nature of the relationship there. So curious for any update on that front?
Yes, there's a couple of comments there. I mean in terms of partners in general, they continue to have a significant influence on the pipeline. From the standpoint of how much of the implementation load they're carrying, that's always harder to measure just because, of course, that revenue doesn't flow through our books. But when we look at sort of the number of people involved in there in the market, it looks to us as though that our partners right now are carrying roughly 30% of the implementation workload. And that number is rising.
So -- I mean, even when you see our SaaS revenue rising at the rate that it's rising and we had to look at our professional services growth, you can see that more and more of that work is moving into partners. But at this point, it's still only about -- and this is only an estimate, but we estimate that it's about 30% of the total work at this point.
In terms of Oracle, I mean, we continue to have a great partnership out in the field with Oracle. We're finalizing interfaces to the Oracle platform for the -- so there'll be standardized out-of-the-box supported interfaces to that platform, and they continue to be a great partner with us in the field, particularly in health care.
Our next question comes from John Shah with National Bank.
So Peter, could you maybe talk about your customer win this quarter in terms of their size, the type of deployment they're having and where they're from, your partnership channels, or internal?
Sure. I mean the -- let me see -- so two of the wins this quarter were in the state of Texas. I'm not going to go much beyond that because that I'd be saying specifically, which ones they were, but they were point-of-use OR, cath lab, general supplies projects that we won down in the state of Texas. One was a very nice win in Canada, actually in British Columbia. And that was of a similar nature to the two down in Texas.
Partners were involved in, I believe, all three of those. Certainly, 2 out of the 3 partners were quite substantially involved.
From a size standpoint, they were fairly typical initial deals right around our -- if I look at the average of the three deals, they'd be right around our average health care size now. The -- I'm trying to remember now. You had a string of questions there. Did I cover them?
Yes. And for the SaaS growth this quarter, how much of that is coming from existing customers versus new? Because you still have a base of customers on maintenance contracts. So how long do you think it's going to take them to fully transition to SaaS? And how should we think about their acceptance rate?
You want to take that one, Mark?
Yes, sure. I just want to make sure I'm off mute. Yes. Yes. So the new business in the bookings in the quarter was -- is a little bit less than 50%. It's only about 40% new business and roughly 60% expansion in migration business.
In terms of like how those migrations are going in health care, we're -- we've got much more of the migration has already happened in the last -- the prior 12-month period. Ending Q3 of fiscal '23, we had quite a bit of migrations that happened in that period. So the piece of migrations there is slowing down because what's left in our base of ARR from legacy maintenance and support is getting smaller on the health care side.
And there's still some more migrations that will happen there. I think they'll probably continue to happen over the next couple of years, but it's getting quite a bit tapped out there. On the complex distribution side, it's a different story, still a big chunk of our maintenance and support revenue is complex distribution and those are ripe to migrate. And like I mentioned a little bit earlier, over the last couple of quarters, in particular, we've seen some real interesting movement there on migrations out of complex distribution.
But I think the tail on that migration turn is definitely -- it's definitely multi-years. I mean we'll probably be talking about that for -- I wouldn't be surprised if we're talking about that for 4 or 5 years.
Got it. Last question for me is regarding the hardware. You continue to post strong results. I know it's not part of the core growth story, but could you maybe point us the direction of the hardware business going to 2025?
Yes. I mean 2024 was a substantial year. A lot of projects in hospital projects, we're delivering -- we delivered a lot of hardware in there. Q3 was -- the one we just reported, was a pretty high watermark on that part of the business and had some of the proptech hardware in there and some storage stuff, mostly health care related stuff driving that as hospitals roll out into different rooms and different theaters and additional hospitals, the on-site hardware tends to deliver.
So it will really depend on project. It's kind of variable. It will depend a lot on project timing that hardware tends to deliver on the back end of projects. And so it will really depend on timing there. So it's a bit hard to -- I know it seems a bit evasive, but it's -- as we always say, that's notoriously sort of hard to call.
I wouldn't expect a significant upward trend on hardware. We think about that. We think about it generally a little bit flatter growth, but maybe not substantial growth. But we'll see. It really depends on the projects, the type of projects that are moving, whether the networks decide to buy hardware from us or independently. So there's quite a few variables there, John.
Gentlemen, there are no further questions at this time.
Great. Well, thank you all for joining us for these financial results on this call. And as always, if you have additional questions, please don't hesitate to reach out to Mark or I, and we look forward to talking to you sometime around the end of June when we release our Q4 numbers. Thanks, and have a great day.
That does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your line. Have a great day, everyone.