Good morning. My name is Pam, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Softchoice Q2 2022 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If at any time during this call you require assistance, please press star zero for the operator. I'd now like to turn the conference over to Mr. Tim Foran, Investor Relations. Please go ahead. Thank you, Pam, and good morning, everyone. Welcome to Softchoice's Q2 2022 conference call for the period ended June thirtieth. Reminder that for purpose of the recording, today is Friday, August 12th, 2022. I'm joined today by Vince De Palma, Softchoice's President and CEO, Bryan Rocco, CFO, and Andrew Caprara, COO. After prepared remarks, we will open it up for analyst questions. The company will make forward-looking statements on our call today that are based on assumptions and therefore subject to risks and uncertainties that could cause the actual results to differ materially from those projected. The company undertakes no obligation to update these statements except as required by law. You can read about these risks and uncertainties in our earnings press release today, as well as in our filings with Canadian securities and regulatory authorities. Also, our commentary today will include adjusted financial measures which are non-IFRS measures. These should be considered as a supplement to, and not a substitute for, IFRS financial measures. Reconciliations between the two and relevant disclaimers can be found in the company's MD&A, which is available on our website. Finally, please note that because the company reports in US dollars, all amounts discussed today are in US dollars unless otherwise indicated. With that, I will now turn the call over to Vince De Palma. Thank you, Tim, and welcome everybody. Before we begin the review of our second quarter results, we also announced today that Bryan Rocco, our CFO, has made the decision to resign after five years with Softchoice. Bryan will be with us for the next month to assist with the transition of responsibilities. We have appointed Yota Skederidis as interim CFO and have engaged an executive search firm to identify a permanent CFO. Yota is a chartered professional accountant and has been with Softchoice for more than a decade. Prior to this role, she served as our VP of Financial Reporting and Tax since 2018. Yota's experience with Softchoice, her industry knowledge, and extensive financial background make her well-positioned to serve as our interim CFO. We have full confidence in our entire finance team and expect the transition to be seamless. I do wanna take a moment to thank Bryan, who is right here to my left in our conference room here in our headquarters. I wanna thank him for his contributions to Softchoice on behalf of the company. Over the past five years, he has played an important role in helping us prepare and execute on our strategic transformation, complete our initial public offering on the TSX, and guide us through a successful first year as a public company. We wish him all the best in the next stage of his professional career. In today's call, I will start by providing highlights of the second quarter, followed by an overview of the current demand environment, and we will review progress on our go-to-market strategy and growth strategy. I will then pass it to Bryan for a deeper dive on our financial performance and outlook before opening it up to analyst Q&A. I will start on slide four of the presentation for those following online. Our Q2 highlights are as follows. We recorded healthy financial results in the quarter and strong year-over-year growth. Our performance was driven by strong growth in our software and cloud solutions, notably in our strategic focus areas, including public cloud consumption and SaaS software. Our gross sales increased 16%, driving a 14% increase in our gross profit, which is how we measure our top line. Adjusted EBITDA increased 20%, adjusted earnings per share increased 23%, and we recorded significant free cash flow in the quarter, which was used to continue our share buyback program, pay our increased dividend, and reduce debt. Customer demand has been resilient across our target mid-market channels despite inflation, rising interest rates, and recessionary concerns. Fundamentally, CIOs continue to prioritize IT investments to increase the flexibility, agility, and security of their businesses, as well as to deliver the digital experiences that their customers and that their people demand, as well as to adapt to market conditions. Our people and our insights-based go-to-market strategy continue to drive customer success and expanded relationships. In Q2, we recorded an increase in customer retention and engagement, which combined to deliver record revenue retention. Finally, we continued to make solid progress on our growth strategy. In Q2, we continued to add new account executives. As a reminder, those are the frontline sales force that quarterback relationships with existing customers and who also seek new customers. Through successful hiring and strong retention, we are well ahead of our schedule of achieving our end-of-year target for our expanded sales force. As these new account executives ramp up the productivity curve, the investments we are making in them in 2022 positions us well for future growth. Additionally, we recorded a sequential increase in our customer base in the second quarter. It's great to see the growth in our customer base moving back to a positive trend as we started to ramp our sales force, as we outlined in our strategy and on previous earnings calls. Additionally, we remain on track to realize the net benefits from Project Monarch as discussed in detail on past calls. As I mentioned, we continue to see a robust demand environment for IT solutions. Gartner market data continues to project healthy growth in global IT spend, driven by digital investments, including in software, cloud, and security. This is expected to offset an anticipated reduction in certain hardware spend this year as customers pulled forward spending on devices in the second half of last year. Our software foundation and differentiated capabilities in hybrid multi-cloud, digital workplace and collaboration, security, and software asset management positions us well to continue to expand our market share within our core mid-market. In the second quarter, gross sales across our SMB commercial and enterprise channels grew double digits. Our increase in gross profit was driven by the commercial and SMB channels, where our customers typically have significant IT requirements but lack the in-house technical expertise to design and implement IT solutions. As a reminder, these two channels comprise approximately 90% of our customer base and about three-quarters of our gross profit. We experienced some gross margin compression in the enterprise channel in Q2, driven by the mix of solutions sold, resulting in gross profit being essentially flat year-over-year. Demand in the enterprise channel is remaining robust. However, we saw a decline in spend with a few of our larger customers for reasons specific to those companies. M&A disruption was one example. We have not seen a broad decline in spend across the channel or any concerns about recession. While enterprise customers comprise around 10% of our customer base, the channel makes up about a quarter of our gross profit. We don't have significant customer concentration as our top 10 largest customers are about 10% of our gross profit. However, volatility in spend among larger customers can impact our gross profit results in any given period, but more so our EBITDA, as the channel has relatively high margins due to the scale and efficiency of solutions being sold. By solution type, sales of software and cloud solutions continued to be the primary contributor to our growth in Q2. Software and cloud represented more than 70% of the increase in overall gross profit, with the remainder split relatively equally between our services and hardware solutions. Growth from our Azure, AWS, and GCP public cloud solutions continues to be a strong contributor to our growth. We estimate that in Q2, we continued to take market share from competitors as growth in consumption of these solutions by our customers continued to exceed the substantial growth reported by the hyperscalers globally. SaaS software was also an important contributor to our gross profit growth in Q2. We've discussed some public cloud case studies on prior calls. Today, I'd like to share with you a story from our workplace business. At their core, our workplace technology solutions enable our customers' employees to be engaged, connected, and creative so that they love where they work and how they work. When this happens, our customers can attract and retain the talent they need to grow and thrive. We support this by planning, securely deploying, and managing the right devices and collaboration platforms. We provide our customers with data-driven insights to understand the impact of their investments and make better business decisions. One of these customers is a North American life sciences company that helps pharmaceutical and biotechnology companies accelerate R&D for life-saving therapeutics. Our customer has a very aggressive growth strategy, with multiple laboratory acquisitions in the last two years. However, these M&A events pose their own challenges. While they can accelerate growth, they are very complex, and they are disruptive to people and culture, with acquired workers often having two to three times the attrition rate of regular workers in year one. We helped them solve this business challenge by creating repeatable integration strategies to accelerate and de-risk future acquisitions. We began with the day one experience for new employees, ensuring that they are equipped securely with the right devices, the right access, as well as with training and adoption for corporate systems and collaboration platforms. Factored into that is ongoing work on security, identity management, and device management. Because we manage their Microsoft and Cisco licensing, we could provide them with insights on employee engagement and insights that fed opportunities like the consolidation of 9 separate phone systems and harmonization of their Microsoft and Cisco environments. As you can see, our differentiated capabilities enable our customers to succeed while diversifying their spend with us and driving revenue. In this case study, we helped our customers consolidate spend, optimize their environment, upgraded their Office 365 licenses, engaged our services organization, and with every new employee onboarded through M&A, we generate additional revenue. All of this is because of our strategy and our people who are passionate about customer success. Our talent investments, which we outlined in detail on our last quarterly call, are critical to our go-to-market strategy as they enable us to go deeper with our customers. Our ability to provide holistic vendor-agnostic solutions and our insights-driven approach is what allows us to be a trusted advisor to our customers. This, in turn, has been driving increased customer retention and higher margin per customer. These combine to drive record revenue retention rate of 113% as recorded on an LTM basis. Our expanded relationships with our customers is also evidenced by the record gross profit per customer of $65,000 that we generated over the trailing twelve-month period. Increased wallet share has been the driver of growth since the advent of the pandemic. Our customer base has also increased this year as we began to see the initial returns on our investments from our expanded sales force, which I will detail on the next slide. Looking forward, we expect to see gross profit growth driven by a combination of new customers and expanded relationships with existing customers as it was pre-pandemic. From an internal perspective, our growth strategy is similarly based on contributions from an expanded sales force and increased sales force productivity, measured as gross profit per account executive. Increased productivity has been the driver of growth in recent years as we have surrounded our AEs with a deep bench of technical experts and specialty sales team members. We recorded record gross profit per account executive of $771,000 over the LTM period. We also resumed expansion of our AE sales force in the latter part of 2021 and are now well ahead of our targeted expansion. We ended Q2 with 424 account executives, and our target was to reach 423-433 by the end of 2022. The acceleration in our growth investments in 2022, both of our AEs as well as in our sales specialists and technical teams, has been due to faster than anticipated hiring, combined with strong employee retention. In a very competitive labor market, we are proud of our ability to attract and retain key talent and are confident that these individuals will allow us to continue to grow the business in future periods. That said, this presents a near-term drag on our earnings as these people move up the productivity curve, and we temporarily have a higher cost structure than planned. We expect to achieve relatively modest operational efficiencies in certain areas in the second half, which will help counter some of the increased workforce costs. However, we remain committed to the expansion of our frontline sales force as it is a key part of our long-term growth strategy. With that, let me turn the call over to Bryan Rocco. Great. Thank you, Vince. I'll start on slide 10 with a look at our top-line gross profit and year-over-year growth. Overall, gross profit increased 14%, driven by growth in our software and cloud solutions, primarily as a result of higher gross sales volumes. Hardware also contributed to gross profit growth, despite ongoing supply chain constraints that continue to impact hardware sales. While our software focus mitigates these supply chain challenges, we are not immune, and our gross profit and EBITDA in 2022 are impacted. However, the situation has stabilized, though we don't foresee our supply-constrained backlog in hardware reversing in 2022. Finally, growth in our professional services also drove an increase in services gross profit in Q2. By sales channel, Q2 growth was driven by the commercial and SMB channels for the reasons that Vince already outlined. We continue to expect growth across all channels in the future, driven in part by our ongoing investments and additions of AEs in all three channels. As seen on slide 11, our growth in gross profit was driven by a similar 16% increase in our gross sales, which is how we measure customer volumes. Similar to prior periods, growth was driven by our software and cloud solutions. Now turning to slide 12, adjusted EBITDA increased by 20% to $25 million from $21 million in Q2 of 2021. Our $4 million of growth was due to the $10 million dollar increase in gross profit, partially offset by a $6 million dollar increase in our adjusted cash operating expenses. This increase was due to higher personnel costs driven by higher headcount related to the growth investments that we have made. Adjusted free cash flow was 88% of adjusted EBITDA over the LTM period, or approximately $64 million. Over the past year, after interest and taxes and some non-recurring costs, free cash flow was used to initiate and then increase our quarterly dividend to our shareholders and undertake our ongoing share buyback program. In Q2, we repurchased and canceled approximately 700,000 shares, or just under 25% of the 3 million shares we are allowed to purchase and cancel under our NCIB. We ended Q2 2022 in strong financial condition, with approximately $200 million in available funds from cash on hand and through our $275 million revolving credit facility. Including internally generated cash flows, we anticipate having significant resources with which to pursue growth opportunities and enhance shareholder returns. Now turning to our outlook on slide 14. Today we reiterated our top line gross profit growth outlook for 2022, which is for over $320 million in gross profit, equating to greater than 11.5% organic growth over fiscal 2021. We have reduced our EBITDA margin expectations to approximately 25%-28% of gross profit from approximately 30% previously. Free cash flow conversion is anticipated to be approximately the same as previously stated at around 90% of adjusted EBITDA. The reduction in EBITDA margin is due to two factors. Number one, our gross profit guidance has been for over $320 million, which incorporated usual conservatism. We now expect to be much closer to $320 million. We have achieved less gross profit than anticipated from the enterprise channel due to a slower than expected ramp in strategic territorial expansion areas and a reduction in spending from a few of our largest customers, as outlined by Vince. This gross profit carries a high EBITDA margin and therefore it has a larger impact on our EBITDA expectations. Therefore, we are taking a more cautious view of the relative contribution to gross profit from certain areas of our business which carry higher EBITDA margins. Secondly, the lower than expected gross profit means that we don't expect to offset our increased growth investments within this fiscal year. These are notably in added headcount, which continues to be faster than planned in Q2. We have been opportunistic in the current environment in hiring to expand our sales force and technical resources and have been running about 30 team members above our internal plan by the end of Q2. These are important high impact investments, including in advanced services, public cloud capabilities and sales capacity, and we did not want to delay them. We have also seen some isolated cost pressure in pockets of our organization due to the inflationary environment, including the cost of some of these strategic new hires. Combined, this has resulted in a higher cost structure than envisioned. In short, the capacity for higher growth has been built into the business through accelerated growth investments. The returns on these investments in terms of higher GP growth have been slower to materialize. However, while a near-term impact, these investments are an important accelerant to our growth in 2023 and beyond. The EBITDA margin range reflects prudent conservatism given the current macro environment as well. Now in terms of cadence, we anticipate low double-digit growth in gross profit in Q3 before moving into low to mid-teens in Q4. Adjusted cash OpEx has less seasonality, and we expect an incremental $2 million or so of cost in each of Q3 and Q4, reflecting our recent investments. To sum it up, despite the near-term impact on EBITDA margins, we continue to drive double-digit organic growth. Our talent investments are positively impacting our customers and our business. We are confident in our organization's ongoing ability to continue driving sustained profitable growth. Now, before moving to Q&A, I just wanted to end today's call with a personal note. As Vince noted, I have made the decision to leave Softchoice. I've been with the company for five years as of July. After taking the company public, guiding it through its first full year as a public company, it seemed like a natural time for me to step away. This was not an easy decision. I remain incredibly excited about the future for Softchoice. I'm very proud of what we've achieved since 2017, and it's been an honor to work with Vince, Andrew, and all the exceptional talent on Softchoice's leadership team and across the company. I especially want to extend my appreciation to the finance and operations teams that reported up to me. With that, I will turn it over to the operator for Q&A. Operator? Thank you. Ladies and gentlemen, we will now begin the question and answer session for analysts. Should you have a question, please press star followed by one on your touch-tone phone. You will hear a three-tone prompt acknowledging your request, and your questions will be pulled in the order they are received. Should you wish to decline from the polling process, please press star followed by two. If you're using a speakerphone, please lift your handset before pressing any keys. One moment for your first question. Your first question comes from David Kwan with TD Securities. Please go ahead. Morning, guys. Hey, David. Hey, Vince. I was wondering how much of the reduction in the adjusted EBITDA margin guidance for this year can be attributable to kind of the things you talked about, namely the accelerated growth investments versus the cost pressures of wage inflation versus the business mix that you talked about, Vince, as it relates to, I guess, the enterprise customers? Yeah. Hey, David, it's Bryan here. So those are the reasons. You know, we're not gonna go through and quantify each of them. You know, what we did was, you know, obviously we're halfway through the year. Q2 was an important quarter for us. We produced solid results. As we looked out, you know, at the balance of the year and updated our forecast, we took a prudent level of conservatism, just given the combination of all of those factors. You know, as we talked about on the call today, we are pleased with the investments that we've made. We think they're great for the long-term prospects of the business, but it does represent a drag on in-year EBITDA. When you combine that with the other factors that we outlined and you just noted, including we are seeing some inflationary pressures, we are seeing you know pressures on demand in some of our higher margin areas of the business like enterprise. We factored that all into the model, and that's really how we got to our updated guidance of you know we reiterated over $320, but we'll see lower margins this year on adjusted EBITDA as a percentage of gross profit. Thanks, Bryan, for the color on that. I guess just on that relative contribution and taking a more cautious view, it sounds like it's mostly that dynamic in the enterprise space for you guys. But is there anything else and just obviously wary of what's going on or at least concerned from a macroeconomic perspective? Like, are you seeing signs like maybe some IT solution projects getting pushed out or sales cycles lengthening? Hey, David, it's Vince. The short answer is no. We're seeing very robust demand in our SMB customers, our commercial customers, as well as our enterprise customers. You know, as we pointed out, the enterprise miss, if you wanna call it that, was mainly due to the fact that there were a handful of large enterprise customers for various reasons. I cited one going through an M&A event whose spend was a lot less this year than we would've anticipated. We expect that to rebound given these are customers that we are going deeper and deeper with all the time. They just, because of their individual circumstances, hit a pause. We haven't, you know, we've been doing a territorial expansion, particularly in the United States with our enterprise team, and those account executives haven't ramped as quickly as we would've expected. The overall demand environment, the market environment is still strong in the enterprise space, and it's still strong in SMB and commercial. We're very confident. We're not seeing any slowdown in spend. CIOs are fundamentally still not just the CIOs, the CEOs and the business leaders are still focused on driving growth, getting the competitive advantage, giving their employees a better workplace experience, and they're investing in IT to make all of that happen. Thanks for the color there, Vince. Just two more questions. One, you had a good slide last quarter just on the headcount and kind of the breakdown of the headcount. I was wondering if you could provide that number for Q2, including kind of what the breakdown was, or at least what the net increase it sounds like in terms of the account executives, the technical experts, and the kind of the sales support management roles. Yeah, you know, Bryan quoted that, you know, at the end of Q2, so as of June 30th, we were 30 headcount ahead of our internal plan, right? I also pointed out, you know, we gave guidance that by the end of year we'd be at 423-433 account executives, and we're already at 424. We're well ahead of that plan. You know, the plan would have called to be somewhere lower than 424. We ended last year, you know, at 396, so you can extrapolate between 396 and 424 and figure out what the midpoint is, and that's probably not far off where our plan would have said. We're ahead of plan there. We also have expanded in various pockets of our sales support resources, like our public cloud sales specialists, as well as in technical experts in our public cloud business focused on GCP, AWS, and Azure. As of August eleventh, we have approximately slightly north of 2,000 total team members or employees. That's versus, you know, 1,984 earlier this year. Yeah. Thanks. Last question, just on a related note, what are the hiring plans for the balance of the year, given that I guess you're ahead of plan? Should we expect hiring to slow down, or you expect to remain consistently ahead of plan? Yeah. We are continuing to invest in this business. We have increased our headcount year-over-year. I'll say by over 100 or so team members. That would have been at the end of June of this year. You know, we're always looking for opportunities to drive operational efficiencies just like any business does, right? Continuous improvement, improving spans of control and all that kind of good stuff. You know, we're gonna maintain our guidance for the AE headcount to be somewhere in that 423-433 range. I don't think we'll go above the high end of that range, but we're very proud of the fact we're able to retain our people because of the great culture and the great work environment we have, as well as attract new talent. On the technical side, there are certain areas because we're ahead of plan, we're fully staffed, and there are some areas that we'll probably make some additional hires 'cause we see the demand in the marketplace, and so we're gonna be very strategic about that. Exactly where we'll end up at the end of the year is probably not far off of where we are at the end of Q2, but it could be a little bit even higher. As we think forward to 2023, you know, and what investments we're gonna make in the back half of this year to make sure we continue to drive double-digit organic growth next year will be something we'll be working on in the coming weeks and months. All right. Thanks for the color, guys, and good luck, Bryan. Yeah. Your next question comes from Brian Essex with Goldman Sachs. Please go ahead. Hi, good morning, and thank you for taking the question. Rocco, I was wondering if you maybe could dig in. You mentioned the prepared remarks, you know, the strong performance, particularly noting, you know, public cloud consumption and software. Like, on the public cloud side, could you maybe peel back a layer or two and give us a little bit of insight there? Is this from kind of digital transformation work that your customers are undertaking, or maybe to better understand what some of the core drivers of that strength would be? Yeah. Hey, Brian, this is Andrew. I would say that is definitely the leading motion, right? As these organizations have come through the pandemic, many of them have needed to revamp how they serve their customers and how they work for their employees. They've moved many of their applications into the cloud environment, and now are starting to think about how they leverage some of the cloud-native tools to actually enhance and improve those applications, so they can add new features. As we've invested in these advanced capabilities and high-impact investments that Vince and Bryan talked about, a lot of them are going deeper into that cloud transformation with our customers. Investing in things like application development and application modernization and transformation of data and AI systems and datasets, these are all areas that we've gone deeper in. When we talk about the growth in software and cloud, it really is three things. I mean, first is just winning more and more new customers because of the fact that we have really advanced managed services to help them govern, optimize, and manage their cloud environments across the top three public clouds that we span Google, AWS, and Azure. The second area is that we are going deeper with services, and as we add more and more features into these applications, they do consume more public cloud. We do have a natural increase in the consumption of cloud within our existing customers or the customers that we bring into management on Softchoice. The third thing that we see right now is, you know, the reality of the supply chain constraints on the hardware side. We have seen an uptick in customers who are starting to look more aggressively at data center evacuations, or at least more aggressively at needing to move some of their applications into a cloud environment due to the lack of hardware availability. We've been helping a lot of customers with that, and our strength as VMware's top partner globally this year plays a strong role in that because many of these applications are sitting on the virtual machines in the data center, and we're one of the market leaders in helping organizations move these virtual machines into the public cloud. Got it. Super helpful color. Thank you. Maybe just a quick follow-up. Maybe a little bit more detail on your headcount and hiring process. It's great to see that you've kind of improved retention. Outside of better retention, what would drive accelerated hiring? Maybe if you could give us a little bit of insight into your process there and, you know, how maybe better traction on the hiring side manifests itself and then results in the kind of higher onboarding that you've seen this quarter. Hey, Brian, it's Vince. You know, great question. You know, one of the things we pride ourself on is our culture. As we pointed out on past calls, we've been voted a great place to work in Canada for 17 consecutive years. We're one of only two companies that has that designation in Canada. We're a best workplace in the US, best workplace for inclusion, best workplace for youth, best workplace for giving back. We're best workplaces to work for LGBTQ+ equality in 2022 again. We got an award from Cisco for our global social impact partner of the year in 2021. We just have an amazing reputation in the marketplace. As I pointed out on past calls, we have an awesome talent acquisition team, who are out there all the time recruiting, developing relationship with prospective new team members, as well as our frontline leaders. I got to give all of them, the credit to. We don't just ask the talent acquisition team to do this. You know, our frontline leaders are also responsible to be in, you know, continuous recruiting mode to, 'cause they know their demands of their teams are gonna go up. Between our reputation, the focus of our people leaders, and the focus of our talent acquisition team, we've been able to do a great job of attracting people into our entire organization, whether that be the sales force, the technical individuals that support our sellers, as well as all the people in our respective corporate functions. Great. Thanks. That's very helpful. Your next question comes from Paul Treiber with RBC Capital Markets. Please go ahead. Thanks very much, and good morning. Just, yeah, last quarter you provided billings growth, and I thought it was a healthy metric to give. You know, how does billings growth this quarter compare against last quarter? Maybe if you don't give the number, just can you speak to the momentum there? Hey, Paul, it's Bryan Rocco here. Good question. Last quarter, like, we provided billing information because there were some anomalies, especially in our services business, where our rev rec reported gross profit and gross sales and net sales numbers were lagging some of the billings activities as we had some projects that booked and billed but had not been recognized. We only pointed it out because it was an anomaly. In most periods, you know, our billings are very closely aligned to the gross profit numbers and even the gross sales numbers that we report out, and that would've held true again. We got back to kind of normal times in Q2, and that's the reason why we didn't. If you recall last quarter, we talked about especially a services billings number, and then if you look at, you know, in Q2 of this year, we produced healthy rev rec gross profit in our services business as a result of those billings from Q1. Okay. That's good to understand the dynamic there. Just going back to the macro and, you know, obviously your comments are very positive on the demand environment and the demand that you're seeing. There are larger vendors out there that are just talking about elongation sales cycles, some softness in the sectors. What do you think that you're benefiting from that is probably more company specific, that is probably not maybe reflected in some of what the larger vendors are seeing because there are areas in their businesses that are perhaps slower growing? Hey, Paul. You know, I take us back to the strategic focus of this company has been, you know, when we started on this transformation over five years ago, the focus on the highest growth areas in the IT solutions industry, and those being cloud, workplace, and digital collaboration being number two, and number three being software asset management. Of course, security is embedded in all three of those things. Because we have focused on the highest growth areas in the IT industry, and as Andrew pointed out, you know, customers are looking to figure out how to leverage the cloud, how to get a competitive advantage, how to evacuate a data center and move into the cloud, do that in a way that's cost effective with the right governance, the right security and so forth. Tremendous demand there. Digital workplace. As companies return to the office, it's not the same office as it was pre-pandemic. You know, and we all experience it where we're in hybrid calls, where there's half or 40% of the people in a conference room and the other 50 or 60% are remote. How does that environment work? That's increased demand for our workplace and collaboration solutions. With remote workers, you know, the heightened awareness around security, right? Has really taken off because companies need to make sure they have the right security in place with workers working not only in office, but remotely. You know, customers are always looking to figure out how to best leverage their investment in their software assets as well as their hardware assets, but we have an intense focus on software asset management and trying to help them save money by eliminating redundancies and help them make sure they're driving the right adoption of those solutions and that their employees are getting the benefit of all the investment they made to improve collaboration and productivity. I think it's fundamentally that we're focused on the highest growth areas within the IT industry. If I could add, Vince, just quickly, Paul. I would also add that, you know, we're very confident in the investments we've made and the strategy we have, that we're winning and taking share. So while the numbers for those manufacturers or partners of ours may be challenged, the reality is we've invested in the kinds of services that customers need right now. We've built out the lifecycle services around modern work and an Office 365 and the Microsoft Cisco stacks around collaboration to help customers truly adopt the technology and manage their entitlements and manage their licenses and customers are seeing the value in that. We're one of the only partners in North America that has the strength across all three public clouds to be able to help a customer manage a multi-cloud environment, which is increasingly common. We believe that the investments we're making are the right ones and that they're taking share. You know, we're putting up, as you saw, 15-ish% GP growth in the quarter, all organically, right? Which we believe is a positive trend and a positive sign that that we're doing the right things and customers are seeing that value. Thank you. That's helpful to understand. I'll pass the line. Your next question comes from Divya Goyal with Scotiabank. Please go ahead. Good morning, everyone. Congratulations on the good quarter and excited for you, Bryan, here. My question comes around something that's been discussed here a few times already, but on the account executive count. You indicated that you have resumed expansion of the account executives. Could you provide some color on the breakdown of these account executives and if there is a segment-wide kind of growth that you're seeing in SMB versus commercial versus the enterprise side, given your indication of slowdown on the enterprise side of things? Hey, Divya Goyal, it' s Vince. The short answer is we are making AE headcount investments in all three channels, SMB, commercial, and enterprise. We see robust demand in all three of those segments, and so we are being very strategic in making sure we're increasing headcount in all three segments. That's the short answer to that question. No, that's good to know. Sorry, I lost my question here, but let me move on to my next one for now. Could you provide some color on the recurring revenue, given you have recorded such a strong organic growth for the company? I couldn't hear your question, Divya. Could you repeat it, please? Yeah. I was just wondering if you could provide some color on the recurring revenue, given the company has recorded such strong organic growth on a year-over-year basis. I think in our prospectus and other materials, we quoted a number that's around 55% of our business is recurring plus recurring. Yeah. You know, just given our focus on software, cloud, and services and the growth that we've seen there, that we continue to trend and move up a bit higher on that number. That provides us with a base, you know, as we do go into some you know, uncertain macro environment potentially. We do have a you know, a base of business that you know, protects us there. You know, also related to that number, you know, I know you weren't touching on this, but, you know, I will point out 113% net revenue retention, and so we continue to be at, you know, record levels. You know, the majority of our business, the vast majority of it comes from selling into our existing long-standing customer base. Our customers have been with us on average for nine-ish years, and they continue to buy from us kind of quarter- after- quarter, week- after- week, year- after- year. Those, you know, are really two key pillars of, you know, the stable recurring revenue in our business. That's helpful, Bryan. Thank you. Just going back to my staffing question, would you guys also be able to, and I think you did briefly comment on it, could you comment on the utilization rates? Do you report them? I know Vince has mentioned a few times that the demand environment looks very strong, but with the ongoing broader macroeconomic weakness that we are seeing across some of the software companies and the technology sector, do you anticipate for next year a little bit of attrition to run, or do you see the headcount growth to continue strongly in the next few quarters into 2023? Yeah. You know, we've been just launching on our 2023 fiscal planning and, so we don't have any specific numbers we're gonna report out in terms of what we expect to do. But I think just given our overall strategy to drive continuous double-digit organic growth, to do that, we will continue to make the appropriate investments in our sales force, in our technical experts that support the sellers, as well as in the corporate functions that support all of those people. We don't have a specific number we're gonna talk about, but we will be making the appropriate strategic investments in headcount and in capabilities to be able to drive consistent double-digit organic growth. You asked about utilization. I don't. I'll turn to Bryan, but I don't believe we are reporting any utilization numbers externally. Yeah, that's correct. Okay. That's helpful. I'll pass the line. Thank you, guys. Thank you. Your next question comes from John Cheung with National Bank. Please go ahead. Hey, good morning, guys, and thanks for taking my questions. I remember at IPO, the company gave a break-even timeline for newly hired AEs. Given the current market environment, any updates on that timeline or any plan to potentially accelerate it? Yeah. John, I think we had a little noise here. I think the question was around timeline to hire AEs. Break-even time that you talked about on the roadshow? Yes. Oh, yeah. I'd say no real change there in our SMB and commercial segments. You know, we quoted that, you know, in SMB, we usually see break even in that 12-14-month window, and I'd say that's probably pretty consistent. You know, they ramp, they get very productive at, depending on the AE at the 3-month mark or the 6-month mark or the 9-month mark, but they break even in aggregate at the 12-14 month. We see a similar trend in commercial. I'd say in enterprise, as I've mentioned on the call, you know, we've done a, an expansion of that team. That expansion has been targeted towards the U.S., and we have seen a slower productivity ramp, with some of those AEs. The reason for that, just to give you a little color, is that. You know, in our SMB commercial and even in our enterprise business, when we increase our sales force, we use a peel and grow strategy, which means we peel off some existing lower spending customers from one AE, give it to a new account executive, and then they go deeper with those existing customers who may have been spending less than with us than their addressable spend would indicate they should be spending with us. As it turns out, in the expansion in the US and our enterprise business, when we've done targeted territorial expansion, we've put AEs in some territories where there weren't any existing enterprise accounts to give them. They were essentially hunters. That takes a little longer time to ramp, and I think that's what we're experiencing in the US. You know, the AE additions in the enterprise channel in Canada and in other parts of the U.S. where we have accounts we can peel off to them, are doing quite well. It's just in some of those territories where we expanded with enterprise, where we didn't have some accounts to peel off and give to those new AEs. Overall, no real degradation in our break even for our sales additions. Okay, that's great color. Thanks. On inflationary environment, so how many of your IT vendors have actually increased their solution price in this year? If that's the case, how should we think about the impact on your gross margin? Also, would you expect any pushback from your clients? That is a standard thing that often happens every year with our particularly on the hardware side. Obviously, you've seen and some of them increasing even more than normal. The reality is it doesn't really impact our margins at all, because essentially what they'll do is they'll increase the price, the list price to the customer and increase the cost to partners like us proportionally, and so everything kind of moves up together. At this point, I think customers are resigned to the fact that this is happening in the current macroeconomic environment, and so they're planning accordingly for that. We've not necessarily seen a change there other than what you've probably read about or heard about when you hear some of these hardware manufacturers speak. It's not having a, you know, materially different impact on our business. Okay, that's great color and thanks. Top of the line. Ladies and gentlemen, as a reminder, if you do have any questions, please press star one. Your next question comes from Martin Toner with ATB Capital. Please go ahead. Good morning. Just to clarify, the business mix, that's driving the guide down is weaker enterprise. Yeah, for the most part. I mean, if you look at, you know, even our Q2 numbers, you know, we drove really high growth in SMB and commercial, and then the enterprise business on a GP basis was, I'll call it flattish. Not the double-digit growth that you know, we expect and we try to drive in the organization. Vince outlined kind of the reasons or drivers of that. It was that, and then combined with the fact that our enterprise business, just given the nature of it and the efficiency and plan sizes within that business, it does carry a higher EBITDA margin than our SMB, for example, which is on the other end of the spectrum. That was the main kind of mix reason. Of course, we outlined a handful of other reasons that we included in our reforecast that resulted in the 28% EBITDA margins. Sorry. Great. To meet guidance, the year is quite back half weighted. I guess that kind of implies that the Project Monarch benefits are also back half weighted. Q3 is a step up in a seasonally weak quarter, and Q4 is a big EBITDA step up in your busiest quarter. Can you talk to the confidence in achieving those step ups required to hit your guidance? Yeah. We've spent a lot of time going through and kind of forecasting our business in the back half of the year. You touched on a bit of the seasonality, like Q1 is our smallest quarter. Q2 is our second biggest quarter. Q3 is in between those, and then Q4 is our biggest quarter. There is operating leverage in our business. You know, we talked about it on the call, our adjusted cash OpEx, mild seasonality in that based on kind of variable compensation and a few other factors. But for the most part, it's, you know, flattish from quarter to quarter. When you see kind of higher GP in quarters like Q2 and Q4, the EBITDA margins and the EBITDA growth does come out kind of more prominently. You know, just given the investments that we've made, factoring in kind of, you know, the environment that we're seeing, some of the pressures we're seeing, some of the upsides that we're seeing, that's how we got to kind of reiterating the top line. I think, you know, Vince mentioned it and I mentioned it as well, we are seeing robust demand and CIOs and CEOs are still investing in their business. We've made our investments. We've added kind of the sales capacity and the productivity investments. We're seeing a slightly lower ramp on them and so that's why we're seeing kind of, you know, a slight downgrade on the EBITDA margins. Thanks a lot for that, Bryan. Last question from me. Should we expect the pace of buybacks in Q3 to increase or decrease relative to Q2? Sorry, Martin, can you repeat it? Was it about the buyback? Yeah. Should we expect the pace to increase from here or decrease? Yeah. We have been active with our NCIB program, and you can go on SEDI and see kind of what our activity has been from, you know, basically month to month. Our plan is to continue to be active out there at levels that make sense, you know, for the company. We noted on the call, you know, in the quarter, we did about 25% of what we're allowed to do for the year, and you would have seen kind of, you know, our level of activity on a monthly basis. Our plan is to continue to be active out there. Okay. Is the philosophy on buyback to be more fairly consistent rather than opportunistic? Yeah. If you know our approach has been you know at levels that you know management and the board feel kind of make sense, and it's an accretive investment for the company is where we've been active. We are you know as you know like we are a high free cash flow generating business. You know we talked about our 88% free cash flow conversion. We've got very little maintenance CapEx. We pay a dividend, which we increase, and that leaves us with you know a significant amount of cash flow to you know enhance shareholder value. You know we have been in Q2 we've been using that for buyback on an opportunistic basis during the quarter and we'll continue to take that approach. Great. That's all for me. Thanks. I appreciate those answers. Your next question comes from Nick Agostino with Laurentian Bank Securities. Please go ahead. Yes, good morning, everybody. I guess, Vince, just trying to understand, maybe reconcile here when I think about the commentary you guys provided, a very healthy demand environment over the course of Q2 into Q3, stabilizing hardware market, as you guys pointed out. I think in past calls you said that you were gonna start to increase your spending in the second half of the year. It looks like you've done it ahead of that one quarter ahead. I'm just trying to understand why you pulled it forward given that you're seeing. You know, demand aside, you were seeing the contraction specifically within the enterprise. From a matching perspective, what kind of drove the decision to spend even though your enterprise customers were contracting? I just wanna clarify two things. I don't know that we ever said that we would have the investments be back half loaded. We sort of make investments at a pretty steady clip through the course of the year, right? That's that. Secondly, you know, at the end you said, you know, we have not seen reduced demand amongst our enterprise customers. We've seen a handful of customers reduce their spend that had an impact on us, and it was because of factors unique to those companies, like an M&A transaction. But the overall enterprise base, we're still seeing robust customer demand. The other thing which we've talked about is we've seen slower than anticipated ramp in our enterprise AEs in the United States, where we've gone into new territories where they didn't have an existing customer base to go after. Back to your question. The fundamental reason why we're 30 headcount over our internal plan at the end of Q2 is that we've done a really good job on employee retention, and we've done an incredible job of hiring people. There are a couple of areas where we said, "Look, this is great talent, and it's a very competitive labor market, and we're gonna make the strategic decision to ramp our sales force and our technical experts faster than we had originally planned." 'Cause, people are critical to the success of our business, to the success of our company, to the success of our customers. We're not gonna slow down our, you know, in the first half of this year just because of our internal plan. We made strategic decisions to say we're keeping the talent, and we're finding the talent. Let's hit the accelerator on that. We did. We're not gonna, you know, pare back on that strategy, right? We're always gonna look for operational efficiencies and be prudent of our cost management in the business. This is our organic growth strategy is based on us increasing our sales headcount and increasing our sales force productivity, increasing the number of customers we serve, and going deeper with all our customers, and that comes down to having the right talent in place. We're very proud of what we achieved in H1 in terms of the talent we've been able to add to this company, which positions us for a strong second half as well as a good start to 2023. Okay, thanks for that color. Just maybe following on that, just from your conversations with those clients that are, I guess, tightening up their budget spend in the short term, is there any specific projects or areas of the market that the tightening is happening? Is it a case of you're seeing it from a security perspective or is it cloud deployments they're tightening on? Is there anything of that nature that we can look at a certain market segment of spend that they're tightening from a thematic perspective? Also from your conversations or maybe your sense, when do you anticipate that spend to possibly come back? Is it a case of just giving your guidance, should we expect it to be back in the first half of next year, over the course of next year? Maybe just a little bit of color on that front. Yeah, sure, Nick. You know, I would say these are not really postponed projects. As I said, it's just a few customers going through corporate changes that have impacted their IT spend in 2022. Again, it's with a handful of customers. There's no one category, cloud or workplace or software or security, that we're seeing any slowdown in demand, even among our broader base of enterprise customers, as well as commercial and SMB customers. You know, the miss in the first half of the year in our enterprise business is probably not gonna recoup in the back half of this year. At the same time, we typically generate increased sales from our existing customers. We have very high customer retention in our enterprise business, and we would expect to return to growth with our customers. Look, there's gonna be volatility in any given quarter, but we typically expect growth across all of our sales channels, SMB, commercial, and enterprise, driven by the same-store sales as it were with existing customers, plus with new customer acquisitions. Okay. Just one last question, just for Bryan. You mentioned a stabilization on the hardware side. Can you just remind us, was your hardware backlog a $7 million drag, if you will, on your gross profit, or has that number changed? Hey, Nick, it's Bryan here. Just as a reminder, yeah, we are software and cloud-focused, and services. Software cloud services represent 70% of our business, 30% is hardware. We've quoted in the past that our constrained hardware backlog, stated in gross profit terms, was around $7 million. I think we reported that number at the end of Q1. We've stayed there. That's why we said, you know, the environment has stabilized. We're not seeing. We didn't see in the quarter, you know, additional growth in that constrained backlog, but it hasn't released yet. The other part of, you know, the script today was, you know, we don't expect it to release in 2022. It will release at one point. It will be a tailwind for us at one point. You know, when we look at the environment out there, and there are some pluses and minuses, you know, some pockets of improvement, but some pockets where things have actually, you know, managed to get slightly worse, it's all evened itself out. At one point, that will release, but we're, you know, it's probably for 2023 at this point. Okay, thanks for that. Bryan, all the best on your next chapter. Thanks a lot, Nick. There are no further questions at this time. Please proceed. Well, thank you, Pam, and thanks to the listeners and viewers who joined us today. We look forward to updating you on our continued progress on our Q3 call in November. Have a great rest of your day and a great weekend, everybody. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines. Have a great day.