Good morning. My name is Ivo, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Softchoice Q3 2024 Earnings Conference Call. Should you need operator assistance during the call, please press star zero for the operator. I would now like to turn the conference over to Mr. Tim Foran, Investor Relations. Please go ahead. Thank you. Good morning, everyone. Welcome to Softchoice's Q3 2024 Conference Call for the period ended September 30th, 2024. Reminder for the purpose of the recording, today is Friday, November 8th, 2024. 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, 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 investors' website. We must otherwise note that percentage growth rates that we refer to today are for the identified period ending September 30th, 2024, compared with the same period ending September 30th, 2023. Finally, please note that because the company reports in U.S. dollars, all amounts discussed today are in U.S. dollars unless otherwise indicated. With that, I will now turn the call over to Andrew. Thanks, Tim. Welcome, everybody. I'm joined today by Jonathan Roiter, our CFO. We're pleased to report that in the Q3, we again delivered industry-leading double-digit organic growth, continuing our strong performance through the year. This growth reflects the strength of the recurring and growing SaaS and cloud gross profit in our business model, the diversity of our product offering and customer base, and our ongoing ability to gain market share. This market share expansion has been driven through accelerated customer growth and from increasing margin per customer, stemming from our software and cloud-focused business supported by our services capabilities, which ultimately differentiates us in the North American mid-market, and also from the accelerated investments we've been making in our digital offering, our expanded frontline sales force, and our technical experts. I'll begin with the financial highlights before going deeper into the underlying operational drivers of the performance. We recorded a 10% increase in constant currency in our top-line gross profit, driven by double-digit growth in software and cloud and in our supporting services. Adjusted EBITDA growth of 2% in the quarter was due to strong gross profit growth, partially offset by higher variable compensation and our growth investments, and as expected, adjusted EBITDA margin has been stable year to date as compared to 2023 due to the growth in our gross profit alongside the investments to support our growth opportunities. It's consistent with our prior commentary that this year would be one with increased growth investments so we can accelerate market share expansion in our strategic focus areas, including workplace software, cloud, security, and AI in future years. In short, our performance through the first nine months of 2024 gives us increased confidence in meeting our objectives this year of taking market share and returning our overall top-line growth rate closer to our historical average, despite the slower demand environment in certain pockets. Now, turning to our growth strategy, during the year, we've scaled investments across our three strategic pillars, which I've described in detail in past calls. The first is building a world-class culture. In 2024, I'm very proud that our investments have resulted in even greater team member engagement and retention. For us, this drives increased productivity per team member. For our customers and vendor partners, this drives higher satisfaction, evidenced by our increased customer retention and revenue retention rates, as well as new customer wins due to referrals from our vendor partners, which in turn leads to our second strategic pillar, growing our customer base, which under our land and expand model is a key driver for our future growth, and in Q3, we expanded our customer base by more than 4% and by 5% now in the last 12 months. The success we are seeing in growing our customer base has been driven by our renewed focus on expanding our frontline sales force. In fact, over the past three years, following a pandemic-related pause, we've increased our account executives by 43%. This includes an 18% increase over the past year alone, as we continue to leverage our appealing growth account management strategy to bring on new sellers to expand our customer base and deepen our presence in market, particularly across the United States. The combination of this sales force expansion, along with our customer prospect pipeline, gives us confidence that we'll continue our customer growth in Q4. Our customer acquisition engine also reflects strong ties with our technology partners, who are still a key source of customer referrals for us, as they value our mid-market scale, our ongoing investments in enhancing our certifications and services capabilities, and our ability to integrate their offerings into a complete solution for our shared customers. It's those capabilities that not only help us win new customers but also enable us to deepen our customer relationships, which is our third strategic pillar. Our investments in advanced technical capabilities continue to drive deeper relationships and growth in our strategic focus areas, supported by our advanced software asset management methodology and capabilities. In Q3, our revenue retention rate returned to 105%, reflecting increased customer retention and growing spend with our existing customer base across all sales channels. This 105% rate is also in line with the average of the five years prior to 2023, reflecting the high recurring revenue aspect of our business model. Now, turning to some operational developments in Q3. During the quarter, we launched an initiative to enhance our technology and services proposition. On September 19th, we launched our SAM+ Hub, a new self-serve, centralized, and intelligent subscription software management tool that we've developed internally for our customers and which is the result of the growth CapEx we've invested in this year. It's part of our previously announced launch of SAM+, a suite of software asset management solutions and services to efficiently manage the complexities of subscription-based licensing. Now, since launching the portal, more than 1,000 customers have already actively been using it to optimize their software spend, and we expect significant increases in the near future. This tool differentiates us in the market by providing an unmatched level of insight into a customer's software and cloud environment and enhances our acknowledged software asset management expertise, which we leverage as our lead motion to become a trusted advisor for our customers. It solves the number one concern for CIOs within our mid-market customer base that the environment has become too complex to manage internally, and their software and cloud spend is growing rapidly, but a significant portion is going to waste. For our customers, the hub creates the ability to reduce software licensing costs by comparing actual software usage against their purchased subscriptions and then instantly commanding the recommendations that the hub generates to right-size the quantities or rationalize software titles. And for Softchoice, the hub creates additional software revenue opportunities by incentivizing customers to consolidate more of their software titles and spend through the hub because those customer benefits can't be fully realized if the software spend isn't managed by Softchoice. In short, their overall spend may be reduced, but we expect to gain a bigger share of it. The SAM+ Hub is also serving as a valuable customer acquisition tool as businesses seek to utilize it to optimize their spend. For example, we recently landed a leading satellite communications provider that was struggling to effectively track and manage all of their software, and they felt that their current IT solutions partner was falling short in providing that expected value. We presented our SAM Plus assessments and introduced the new hub, which the customer described as, quote, "Incredible" and exactly what we need. That value enabled us to immediately sign them on as a client as they purchased a large cybersecurity software agreement through us. In the first half of 2025, we plan on releasing updates with advanced functionality, including AI-generated agent support for the ongoing management of subscriptions and the ability to conduct more complex modeling scenarios for modernizing a customer's licensing strategy. Helping our customers optimize their software and cloud spend builds trust with them and opens up the opportunity for more transformational services and solutions. Because in general, our customers have significant IT requirements, but they lack that in-house technical expertise to deal with all of the current challenges. These challenges include things like the vast majority of IT decision-makers right now looking to invest in automation and AI, but there's a significant lack of skills and of technology adoption. Additionally, while generative AI spend is anticipated to grow by some estimates at 50% or more annually over the next few years, almost all cybersecurity professionals are bracing for increased AI-enabled threats. So one of the biggest challenges that many organizations struggle with is identifying which problem to solve first. This leads to a cycle of addressing symptoms rather than the root causes. We bring the expertise at Softchoice to help them cut through the noise and provide them with a logical roadmap that not only reduces complexity and cost, but also optimizes their technology and gets them to the ultimate desired endpoint using technology to innovate their business. Now, while we often talk about our resilient software and cloud business, a key to doing this is by providing critical services for our customers, leveraging our approximately 1,000 technical and vendor experts, which is about half of our team members now. And our services are focused on five centers of excellence for our customers. One, security, which underpins everything we do. Two, modern infrastructure, which is integral to the success of getting to that endpoint of innovation. Three, our collaboration and productivity services help drive an engaged workforce. Four, with applications and data, we help customers transform their relationship with their customers and drive business growth by effectively leveraging data. And five, we have a dedicated and expanding AI consulting and engineering team. And as it relates to the latter, we now have approximately 1,300 Copilot customers, including hundreds that have purchased Copilot consulting or integration services from Softchoice. In Cloud AI, we continue to drive success, leveraging our expertise across all three of the major hyperscalers. For example, we just won a large project with a technology company that provides software for the utilities industry to enable their end-user customers to reduce consumption and become more carbon-efficient. Softchoice will be implementing the AI data platform, AWS Glue, to ingest a significant amount of data from various sources so that consumption trends can be monitored and used to learn what drives efficiency. We then leverage GenAI to automatically prescribe recommendations to consumers that will have the greatest effect on lowering their consumption. Softchoice is both consulting on the business process for generating recommendations from AWS Glue, as well as modernizing the customer's core application to be able to be integrated with AWS Glue. Now, as a result, as it relates to our broad services capabilities, while software and cloud comprises the bulk of our gross profit, our growth in this services area is driven by the value our advanced service capabilities provide to our customers and our vendor partners. Over the past few years, this has been critical to help us evolve with the changing requirements of our vendor partners. We're looking to capture market share by partnering with large-scale IT solution providers in the mid-market, those that have the advanced cloud and services capabilities to drive growth in consumption-based agreements. This has enabled us to diversify our business through our services and through the breadth of our offerings in partnerships with hundreds of vendor partners, which combined comprise the significant majority of our gross profit. It also includes driving significant revenue growth for Microsoft, our largest partner, building on a decades-long relationship. This, in turn, has resulted in higher gross profit for us and increased incentives from Microsoft due to our success. In recent years, we've achieved this by driving customers to upgrade more to M365 E5, to utilize Microsoft Security Platform, to increase Azure consumption, more recently to develop use cases for Copilot, and to leverage the features and flexibility of Microsoft's cloud solution provider, or CSP, licensing vehicle. One way we're doing this is through customer immersion experiences, or CIEs, which we have been doing in partnership with Microsoft. Through these, we facilitate hands-on sessions that allow participants to test-drive Microsoft Office 365 solutions in a live environment focused on security, productivity, and privacy, compliance, and M365 Copilot. For example, we recently provided a CIE around security and compliance for a large mining corporation. While we did not manage their Microsoft licensing, we had re-architected their SharePoint on a project basis last year, so we were already a trusted advisor. Now, following the CIE, the customer selected our professional services team to implement Defender for Office 365, realizing savings in their security spend and simplifying their cybersecurity management. Additionally, based on the in-depth knowledge and experience we provided, which they described as unique among channel partners they've worked with, they moved their CSP licensing under our management, an example of our services driving software and cloud sales for us. This customer is now also scoping further services projects for even more SharePoint-related services and for us to manage their cloud environment. Additionally, they've provided us referrals for other organizations within their industry. We've had a phenomenal year in CIEs in 2024, having provided almost 2,000 through September, which generates significant additional revenues. We also have a very high retention rate of customers that have had a CIE, and it has been an important customer acquisition channel for us. Over the past half-decade, we've also invested significantly in building up our capabilities around Microsoft CSP. Our CSP revenue increased more than 50% in 2023 and is anticipated to increase by approximately 25% in 2024. This evolution has been aligned to Microsoft's multi-year transition to encouraging the use of CSP licenses for the SMB and mid-market rather than enterprise agreements, for which they have been reducing referral fees for channel partners. As a background, Microsoft introduced CSP to ensure their small and mid-sized customers were being provided tailored support by channel partners to select, adopt, and manage their vast array of technologies. The CSP vehicle offers these customers more flexibility in how new products are purchased, with shorter commitment periods and no enterprise-wide conditions. And with CSP, Softchoice manages the customer relationship directly, including providing post-sale service with further incentives provided by Microsoft to drive the adoption and use of their products. This is opposed to solely earning a referral fee on an enterprise agreement. For Softchoice, as a leader in the mid-market with significant in-house services capabilities, the CSP licensing vehicle has accelerated our market share expansion. This is because our solution strengths are tailored to the advantages of CSP, including use case planning, adoption services, customer success programs, and the self-serve control that we provide customers via the SAM Plus Hub. CSP has been the main driver of the healthy growth in our Microsoft Cloud and Workplace businesses and driven related professional and managed service engagements for us. For example, Softchoice recently enabled a Canadian oil and gas company to consolidate their security strategy on M365 E5. Our services are being used to implement E5 to govern user access control, endpoint security, and data protection. This will enable the customer to decommission non-Microsoft security tools that were previously providing that functionality. Through this process, again, the customer also transitioned to CSP at the expiration of their EA through Softchoice. Softchoice built the business case for this expansion of spend via our SAM+ consulting services, and the customer chose CSP because they needed our integrated services to deploy, manage, and support adoption of the new technology. With the sharp rise in CSP licensing, EA fees for us have been declining as a portion of our business for a number of years. And working with Microsoft, we've already implemented motions to further accelerate the transition of our small and mid-sized customers whose EA contracts come up from renewal in 2025 to CSP. And with that, I'll turn it over to Jonathan. Thanks, Andrew. I'll start with a look at our top-line metric, gross profit. In constant currency, gross profit increased 10% with growth across all sales channels led by strong double-digit growth in our software and cloud and services offerings. We also recorded a small increase in hardware driven by a large order in our enterprise channel, which came through in the Q3 as opposed to the Q4, which is our largest quarter. Gross profit growth was driven by a combination of our larger customer base and deeper relationships with existing customers. Gross sales increased significantly in the Q3, a reversal from the first half of the year when gross profit outpaced gross sales. As I've noted on prior calls, growth in gross sales versus gross profit will vary on a quarterly basis due to a mix of sales, but typically smooths out over a full year. On a trailing 12-month basis, gross profit growth was in line with our gross sales growth. The strong growth in our gross profit has continued to enable investments that will in turn fuel our growth in the coming quarters and years. As Andrew noted, we've increased both the size of our frontline sales force and technical experts significantly over this last year. Our continued focus on improving operational efficiency, including through the provision of digital tools to optimize processes and support our sales teams, has helped counter these investments. Adjusted EBITDA increased 2% in the Q3, with the increase in gross profit partially offset by higher variable compensation and our growth investments. Adjusted EPS on a diluted basis was $0.18 compared to $0.27 in Q3 of 2023, with the increase in adjusted EBITDA offset by higher taxes and financial expenses. And finally, net income per share on a diluted basis was $0.15 compared with $0.14 in Q3 of the prior year. Turning to our cash flows, operating cash flow was stable year-over-year with improved working capital management offsetting an increase in cash taxes. As it relates to working capital, our improvements this year means we are targeting a healthy inflow in the Q4 and an overall annual inflow this year to be similar to the inflows of 2023, which, if captured, would result in significant deleveraging by the end of this year since our special dividend. Looking ahead, while we don't give guidance, our performance year to date, including large growth in Q2 and Q3, provides us greater confidence of achieving our aim outlined in prior calls for top-line gross profit growth in 2024 to get back closer to our historical average. I'll note that our software cloud growth rate over the past year was 11.6%, and it has been higher than the historical CAGR over the prior six years. Therefore, as hardware begins to stabilize, potentially in late 2025, as Microsoft ceases support for Windows 10 and AI-enabled products become more required, we should see that strong growth in software and cloud become more visible in our overall growth rate entering 2026. As it relates to the Q4 of this year, as I referenced on our last call, due to the pull forward of some technology partner incentives in the Q2 and coupled with a large third-quarter hardware order, as well as a potential drag from currency, we expect Q4 seasonality to be a bit lower than the average at around 26% of full-year gross profits. In terms of adjusted cash OpEx, which is the delta between gross profit and adjusted EBITDA, we're now aiming to keep Q4 similar to Q3. As Andrew and I have noted through the year, 2024 has been a year of accelerated investments related to our ongoing focus to create a more scalable infrastructure to service our core mid-market channel. Our ability to make such an increase in investments this year while keeping margins stable this year has been due to our full team's focus on being efficient in our administrative costs. I'll note that our margins have expanded approximately one point annually since 2017, though not always linear in fashion. We are planning to resume this historical margin expansion in future years, driven by the natural operating leverage in our business model, continuing to identify efficiencies in our cost structure, and leveraging the more scalable infrastructure from our prior investments, most recently the launch of our self-serve SAM Plus Hub, and with that, we can begin Q&A. Thank you. Ladies and gentlemen, we will now begin the Q&A session for analysts. If you would like to ask a question, please press Star 1. To withdraw your question, press Star 2. One moment, please, for your first question. Your first question comes from the line of Jim Schneider from Goldman Sachs. Your line is now open. Please ask your question. Very helpful color on the Copilot adoption. I believe at 1,300 customers, that implies about a quarter of the penetration of your customer base. Presumably, that's an SMB, but maybe not entirely. Maybe just give us some color on where do you think that can go in terms of penetration over time, and then maybe some anecdotal color you could provide on the increase in number of seats at some of your sort of small and medium-sized customers. Is that something that you could expect to grow double, triple over time in terms of number of seats at a particular customer? Yeah, thanks, Jim. I would say the adds of the 1,300 customers, as you said, is a little over a quarter. It's spread between all of our sales channels, I would say. I wouldn't say it skews only to SMB and commercial. I think there's adoption being had in many places. I will say, though, to your comment on seats, I do think that's where the real opportunity lies. I think we have to remember that this really was only announced in February. So there's many organizations who did not have the time in their budget cycles for 2024 to earmark a lot of funds for AI. And so right now, what we've got are a lot of customers where we're helping to understand readiness, do services to prepare their data and security environments, to start to pilot initial use cases, but we're not seeing a lot of just widespread adoption that rolls throughout the organizations. Now, I am optimistic, though, because, as you said, more than a quarter have already started. And now that we get a full year of getting ready and starting to build budgets for it, I'm optimistic that we'll start to see an increase in seats in 2025. Time will tell if that's double, but I'll give you context. We have almost 4,000 Microsoft customers, 8.5 million seats, and I can tell you we're nowhere near 8.5 million bundled licenses of active Copilot consumption at this point. So we think there's tremendous upside around Copilot and around AI. For us, it's a matter of when, not if. That's helpful color, thanks, and then maybe as a follow-up, maybe one for Jonathan. You sort of made the commentary on returning to your 100 basis points of normalized margin expansion. Obviously, 2024 was an investment year with maybe a little bit less margin expansion. Would love to understand whether you think that 2025 could actually be a super normal year where you could actually deliver significantly in excess of that 100 basis points of normalized expansion. Thank you. Thanks, Jim. Thanks for the question. You know we're not giving explicit guidance in terms of our forward-looking results, but what I could tell you looking backwards and kind of what can we learn from that, we have historically, if you go back to 2017 and up to this year, essentially added 100 basis points of operating leverage. We did go into this year saying that this was a year where we would prepare ourselves to help accelerate growth in the future through an increased investment in frontline salesforce, around customer acquisition, and going deeper with our customers with our SAM Plus Hub and our AI investment. So we knew this year would have some muted operating leverage. Look, as we head into next year, those investments, for the most part, are behind us. We have shown the ability, or we're showing the ability to return to those historical growth rates, and do believe ultimately that the investments that we're making will, even in the longer term, help accelerate growth. So with those two items, we're really confident on being able to continue that historical look of 100 basis points improvement, and it could be choppy. I mean, some years could be larger than others, but at this stage, I don't think we want to be too specific on that. Understand. Thank you very much. Your next question comes from the line of David Kwan. Your line is now open. Please ask your question. Jonathan, I guess you mentioned I saw it in the presentation as well, the benefit from the large hardware order by an enterprise customer. First off, can you quantify that? And then maybe outside of this large order, how did you see the business, particularly from a hardware perspective, kind of trend through the quarter? We've seen many of your peers kind of commenting on it softening, especially towards the end of the quarter and into this quarter. So I was curious to see what your experience was. Sure. Well, it's a good question, David, and let me start with your first part of it just in terms of size. It's probably in the $2 million range around in that geography. And ultimately, how we look at these orders is we know they're going to happen throughout the year. The question is when, as opposed to specifically in any specific quarter. And so with Q4 being our largest quarter, one could have thought it could have happened there, but ultimately it happened a little earlier and happened in Q3. In terms of overall expectations around hardware, I certainly don't want to go overboard by saying that we've turned the corner with this large order in enterprise. But I think we are seeing a little bit more stability. Ultimately, we'd like to get a few more cycles to really be able to call that under our belt, but we're starting to see some stability in the hardware space. That's great. Thanks, Jonathan. And curious to get your guys' thoughts on what you expect kind of going forward with the changes upcoming in the White House. Obviously, there's been talk about increased tariffs, but just wanted to see what your thoughts are on the potential impact. Yeah, I think it's probably pretty early to start making conclusions on that, David. I think there's a lot of ideas out there yet, and it'll be interesting to see what comes to fruition on that. If you remember the last Trump administration, there already was an increase in tariffs, and our industry shifted. I know some of our biggest partners started moving production to different places, and I'd imagine that will continue. But for us, in our position, this is mostly related to manufacturing and hardware, which, again, is now less than 20% of our business at this point. And as you think about that, most of the time in these situations, it becomes a bit of a pass-through to the end customer where the list price goes up, and so does our cost of goods, but our margin rate in between is usually unaffected. So the question then becomes, how do you think these - so a bit of a non-starter, I think, in that sense. And then the question becomes, what do you think is going to happen to the economy if these changes go through? And I think we'll wait and see on that one. I don't think I want to be making any of those predictions. Thanks, Andrew. Maybe just squeeze in one last question. There was some strong growth on the services side this quarter. Wondering what drove that, and maybe any commentary you can provide on how much of that growth or the overall services revenue was coming from AI or GenAI-related engagements. Yeah. So there's been some from that. It's a little bit of GenAI-related engagements. There's a little bit actually from some of the contributing services around GenAI. So as many customers are doing these readiness assessments, what they're finding is that they've got data gaps or security gaps. And so we're seeing an increase in projects that support and prepare customers for AI. But I would tell you a lot of what a lot of our services growth actually comes from our core business, right? We've added a lot of technical overlays and roles, and our sales team is working very hard to show customers the value of using Softchoice Services to modernize and upgrade to the M365 E5 solution suite. So we're doing a lot of implementation work, similar to the stories I mentioned in the prepared remarks. We're doing a lot of work to help customers with the cloud migration and modernization journey of their applications. And so those core areas are areas that we've invested in now for several years, and I think we've made some tweaks to our go-to-market at the beginning of the year this year that started to bear fruit over the last couple of quarters. We've had a couple of quarters in a row of good growth rates in our services business that we expect to continue. That's great. Thanks, guys. Your next question comes from the line of Martin Toner from ATB Capital Markets. Your line is now open. Please ask your question. Yeah, fantastic. Can you guys give us a quick update on Salesforce efficiency? Where are you in terms of moving up that efficiency curve, and how pleased are you with it? Martin, when you mean efficiency, do you mean productivity in terms of how do we drive the output of those folks, or what do you mean by efficiency? Yeah, exactly. I mean, gross profit per sales head kind of idea. Yeah. Yeah. So there's a few things going on there. So when you look at our gross profit for AE, obviously, there's been a bit of a decline, but there's some factors going on there. One is just simple math, right? Our software and cloud gross profit per account executive has increased, but there's been an offsetting decline in hardware gross profit for AE, and that's just tied to what's going on in the market conditions. Second, we've been hiring significantly more people in SMB than in enterprise and upper commercial. And as you can imagine, these account executives do have smaller books of business than enterprise. So when you look at it as a whole number across the entire sales force, that also would depress it. But the reality is we're not actually managing the number at that macro level of total gross profit for AE. We're measuring it by rep, by cohort, by starting class, by level, by tenure, by channel at an extremely granular level. And what we see is the underlying growth ramp for our AEs as they start is still being hit. And in fact, it's equal or even slightly improved to where it was a few years ago. So it gives us a lot of comfort that when we're adding these AEs, they're still on the same productivity curve as they were before, and we're just dealing with some mixed shifts within the total that are not concerning at all to us and give us a lot of confidence that we're going to continue to add more and more AEs. Yeah, that's great. Thank you very much. Is the recovery of hardware just by definition going to be very lumpy? Would you guess? I guess it's going to be lumpy. I'd also guess it's not going to be a massive rebound is my take on it. I don't think all of a sudden you're just going to see 15% growth in hardware sales and laptop sales. I think there's going to be organizations dipping their toes in at different times, but there are real drivers that will have customers starting to need to upgrade some of their devices. But yeah, I don't think we're going to see this wave, in my opinion. I think it'll be a bit lumpier than that. Yeah, makes sense. I would guess. Are there any conditions where under what conditions could the EBITDA margin expansion be greater than 100 basis points on an annualized basis? I could take that, Martin. One of the ways that it could be, which is a way, quite frankly, we're not running the business, is if we stop really investing in future growth, right? So if you saw a reduction in the amount of AEs that we were adding, for example, that obviously would have a significant influence on our leverage. But it's just actually the opposite. I think historically we're closer to that five-ish% range. I think this year we've shown the ability to go above 10%, and that's because of the investments we've been making on those three strategic pillars around building that world-class culture, driving customer base, and going deeper with our customers. It's allowing us to accelerate the amount of AEs that we're bringing year-over-year. And so I think that's actually just going to continue, and in a perfect world, it continues to even accelerate even further the amount of additional capacity we bring through Salesforce. So managing a short-term blip in EBITDA margin is not something that Andrew and I and the management teams are focused on. We're more focused on just steady execution, knowing where we get a return on the investments, continuing to make those investments, accelerating them where they work, and then ultimately growing that top line, which I guess would be the second element. So I'll let you, Andrew. I mean, ultimately, the way that we would like that to happen, Martin, is we obviously blow the top line targets out of the water for the year. And I think there's a few things going on, right? The part of it that I think is going to be really interesting over the next few years is one of the benefits of shifting our Microsoft business to CSP is that we move from a three-year contract where we get largely a spike in year one and then minimal for the next two years to a world in CSP where we get monthly or annual contracts. And so what we're seeing is much more stable and sticky recurring revenue there. And so you start to get to a world where your sales team is operating with a water level that's going up on the monthly recurring revenue business, and they're able to go and spend more time winning new deals with customers and winning new services engagements. And so what we're really focusing on right now is winning as many new customers as we can. And we're back to our historical rate of 5%. As a management team, we want to get that up higher. And as we add more new customers and add more sales reps, those are the kinds of things that are going to allow us to grow even faster and ultimately grow the top line at a faster rate such that it does increase that EBITDA margin. Great. Thanks so much for all the color, folks. That's it for me. Your next question comes from the line of Gavin Fairweather of Cormark Securities. Your line is now open. Please ask your question. Oh, hey, good morning. Thanks for taking my questions. Maybe just to start out, I saw big growth in the U.S. this quarter, 15% on net sales. Curious if you could just provide a bit of an attribution to the regional results versus Canada. How much of that performance is just driven by kind of the higher sales investments you've been making in execution versus any kind of underlying differences in demand levels? Yeah. I mean, we don't get too much into it. Gavin, what I would say is two things. Number one, the large enterprise deal that Jonathan mentioned was in our U.S. enterprise business, so that contributed partly to it. But more of it was actually just the execution in our core business and the investments we've been making in our sales team. As we've said in prior calls, a lot of that investment's going to the U.S. And so we expect that business to grow at a faster rate than our Canadian business. Okay. Helpful, and then I appreciate your comments on Q4 on hardware and incentives, but still a long way to go to close deals. I'm sure that the team will be working down to the line, so maybe you can give us a flavor of kind of the propensity of clients to spend or any kind of higher-level comments around the pipeline size, anything along that line would be helpful. Yeah. So traditionally, Gavin, Q4, in the olden days before the pandemic, Q4 used to be a large end-of-year budget cycle, and a lot of customers were in kind of a use-it-or-lose-it mode with their budget, and typically that was spent on large capital purchases. I think over the last several years, we've seen that trend start to reverse, and obviously, as finance departments and CFOs like our friend Jonathan have gotten control over these budgets, that use-it-or-lose-it mentality is not quite there, so we're not seeing that same kind of massive year-end push in the last couple of years. Saying that, I think we're pretty confident in what we're seeing in the business, and the reality for us now is it's such a great sticky recurring revenue business, with 80% of it being related to software, cloud, and services that we're pretty confident that we're well-positioned to take advantage in Q4, and then I think the other part of it then is what do we see going forward, and how do we think about 2025? I think we'll continue to see the stabilization of that hardware business, but customers are needing more and more help in software and cloud and that business, and the changes that are going on in AI, the changes that are happening with a lot of folks' VMware environments. These are all really positive long-term trends for us that we think will create such just really stable demand. So obviously, I can't speak specifically about Q4 other than what Jonathan's already said in the prepared remarks that we're confident we'll be able to deliver our historical growth rate this year. Very helpful. And then lastly for me, just on AEs, I know you're adding a lot of kind of newer AEs, but it sounds like you're also holding on to the mature sales force longer, which I suspect is pretty meaningful for unit economics. So maybe you could just dive a little bit deeper on retention of that base and whether you think that there's room to stretch that retention out further. Yeah. That's actually one of our key metrics internally this year, and our people pillar of building a world-class culture is our sales force tenure and sales force retention rate. And as you said, it's exactly right. As people become more tenured, their ability to serve customers at an even higher level continues to be fantastic. So we're seeing that number increase this year, which is very positive for this year. But the exciting thing for us is actually looking forward to 2025 and 2026 because, as you remember, we really started to ramp the Salesforce kind of end of 2022, but more so in 2023. And so we have a wave of folks now who are rounding the corner into becoming that more mature and experienced salesperson that we're excited that they're continuing to spend their career journey with us, and they're approaching a higher productivity level over the next couple of years. And so we want to get in that rhythm now where it's consistent. Every year we have that. But because of the pauses that we had in hiring in 2020, 2021, beginning of the half of two-thirds of 2022, we didn't have that wave of people coming into that more productive range that we do have coming in the next couple of years. So we believe that has us optimistic about what that means in the future. Thanks so much. I'll pass the line. Thank you. Your next question comes from the line of Stephanie Price of CIBC. Your line is now open. Please ask your question. Thank you. A peer reduced its guidance this quarter after calling out lower incentive revenues from the Microsoft partnership. Sounds like you're not seeing any slowdown at Microsoft. Maybe you can give us a bit of an update on the partnership and any color you can provide on what percentage of the business Microsoft represents. Yeah, sure, Stephanie. I mean, we've said Microsoft. I think we disclosed Microsoft was around 20% of our revenues. When you include sort of the rebates and the gross profit, it's a little bit higher than that. But the reality is we are seeing great growth and great performance in our Microsoft business. And we also have seen that we've been a leader in Microsoft's mid-market, right, with their small, medium business and the SMC, the corporate division at Microsoft. And this is exactly where Microsoft wants channel partners to be playing right now. They want us to be bringing that CSP experience to those partners. And so we've seen actually an increase in our incentives from Microsoft, and we've seen great growth in our Microsoft business. And it's not just the volume, right, but the fact is we were named the Microsoft Scale Partner of the Year in the United States this year, and we were one of only three finalists globally for that award. And the reason we won that is not just because of volume. It's because of the capabilities that we're bringing to them and to their customers, the ability to do the services and drive the adoption, the CSP motions that we have to take full responsibility for that customer's environment. And so we're actually seeing an increase in the number of Microsoft customers and the wins we have because of the capabilities that we're bringing to the table. So we feel like our partnership with Microsoft actually has never been stronger, and we're excited to continue that growth. I think some of the changes in the industry that you mentioned, I think there's going to be a lot of folks starting now trying to build the capabilities that we've been building for the last three or four years. And it's not going to be easy. It's going to take them some time. And we feel like we've got a significant head start over many of our competitors, and we ultimately want to take advantage of that. Thanks for the color. And then just on the SMB channel, it looks like gross profit was up pretty significantly year-over-year. Just hoping you can unpack the drivers there and maybe call out some pockets of strength. Yeah. I think number one, the team there is just doing a fantastic job. We have to give them a lot of credit. The energy and excitement that they're bringing to our customer base is fantastic, and they're really serving customers at a really high level, and that's resulting in a lot of new customer wins that we have this year coming from our SMB channel, and they've also increased their retention rate pretty significantly over their historical average, so we're seeing that increase in customer base from both of those measures being a pretty nice driver of that. We've also seen this team do amazing work in driving services, so again, this is a segment where a lot of these customers have significant IT needs and challenges, but they've got very small IT departments and often lack the skills and resources to be able to make the kinds of transformations that they need to make to compete in their space. And so this is where we can really offer that end-to-end service support for those customers. And when we do that, we obviously earn the services engagement. But like some of the stories I told, often they move agreements to us, and we take responsibility for a full Microsoft environment, or we expand into other software titles and expand what we're doing with those customers. So we're seeing significant growth in that motion of driving services first into those customers and then using that as a software expansion tool from there. Thank you. Your next question comes from the line of Paul Treiber from RBC. Your line is now open. Please ask your question. Oh, thanks very much. And good morning. Just wanted to follow up on your comment on services within SMB. Just generally, could you speak to the attach rate of services across your customer base, how that's been trending? And then you mentioned SMB is getting good traction of your end-to-end offering. How do you see services across all channels, and how do you drive it up in all channels Yeah. So overall, our services penetration rate is higher in SMB and commercial than in enterprise, I would say. But I would say the overall, I'd have to probably a quarter to a third of customers are buying services in any given year. Now, you look at them over a multi-year period, though, because sometimes there's projects that go on one year and not the next. And so we're driving service engagements in a good percentage of our customers, but there's still an opportunity there. It's something that we talk about as a leadership group and as a sales organization, is how do we have more customers that entrust us to be that services partner for them. And so that number has been increasing in terms of what we're doing for customers and being able to help them. And I think building our services capabilities off the anchor of the cloud migrations that customers are going through, as well as the upgrade to E5 and all of the collaboration and productivity solutions within the Microsoft environment, those have been two of the focus areas for us. And the offshoots now recently being security and AI in the most recent year or two. But those are really fundamental to what we're trying to do for our customers. So we're seeing that increased adoption in those solutions, which then in turn is driving our service adoption rate. So as an organization, we've been investing a lot in technical folks to be able to go and have those kinds of services conversations with our customers. And we expect that growth rate and the penetration rate to increase in the coming years. And as I mentioned, we're seeing great growth in services in our SMB channels. So that's been a key bright spot for us within the services side as more and more of these organizations are entrusting us to do pretty big transformational services programs for them. And then looking at a SAM Plus, you mentioned 1,000 customers using it. What do you expect that penetration rate to increase to? And is there any reason for customers not to use it, or why wouldn't they use it? And then do you have generally insights into how much your software asset management improves customer retention and customer expansion compared to if they don't use it? I don't have those numbers off the top of my head, Paul. Certainly, as we do more and more of the quarterly meetings or monthly meetings with our customers, when we do those, the retention rate increases for sure. So I think that that's been a key part of it. But now we've got this added dimension of it doesn't take an in-person or a human interaction in order to create that stickiness, but you actually just create the stickiness through the portal and having the customer spend right there for them to make it really easy for them to visualize and manage what's going on in their environment. So we expect that to significantly improve the stickiness in our customer base. In terms of the adoption rate, I want every customer of ours to be on the SAM Plus Hub. So it's just a matter of us going and demoing it and showing them where we are and what we can do. But at the end of the day, I don't really see any reason why we would not want that kind of interaction with our customers because in this day and age, I think customers expect to have some sort of a platform or digital place to understand what's going on with their purchase behavior. It's something that we all do in our consumer lives, and I think that expectation is increasing in the corporate world. So we expect to roll this out to all of our customers over time. And at this point, it's a matter of being able to properly set up time to demo it and bring them on board and teach them how to use it. And we enter their standards in. So for example, if they've got a laptop configuration that they uniquely buy every time, we want to get that loaded properly. So there's a bit of work to get it set up for customers the first time. It's not as simple as saying, "Hey, we're going to send you an email and 5,000 people log in." We want to make it useful for them by setting it up and tailoring it to their specific needs. And so that's the work that's ongoing right now. Thanks for taking the questions. Your next question comes from the line of Divya Goyal from Scotiabank. Your line is now open. Please ask your question. Good morning, everyone. So as we're on this discussion of SAM Plus, I just want to be clear. This is a proprietary IP platform. Could you help us understand how exactly is it monetized? And is it predominantly under the software and cloud business, or is there a services component to the SAM Plus revenues that you potentially record on the books? Yeah. So Divya, thanks. In our first iteration of it right now, it's not revenue-generating in and of itself. The idea is that we want to give this platform to as many customers as we possibly can to incent them to move more of their spend through Softchoice to make it easy for them to visualize everything in one place, to have self-serve access and control over their software entitlements, to work with an advisor to get the recommendations on how they can improve their spend or optimize their spend. So for all those reasons, we believe that it's a great opportunity for us to cross-sell other titles, and not just software titles, but anecdotally, we had a customer that didn't know we sold Jabra headsets. And then through the hub, they searched for it, found them, and bought Jabra headsets. So we're seeing these ancillary opportunities to cross-sell other solutions to our customers. So that's part of the reason. And then, as I mentioned, the stickiness of having all that in one place and increasing our customer retention rate, those are the initial sort of ideas or not ideas, initial key outcomes that we're trying to drive with the hub. Now, going forward in the future, there's potentially a world where we could start to think about monetizing some features. So for example, if we took full automation and used AI and automation to fully control that customer's spend and optimize their environment in real time, taking on that responsibility is an example of the kind of thing that may be a service that people will pay for. But for now, it's about getting this in as many customers as possible, trying to use it as a tool to engage them, provide them more information, increase the stickiness of working with Softchoice. That's helpful. Just for this Microsoft discussion, I was actually going to remind us, who are your key software vendors that the company works with? Because the 20% or slightly above as Microsoft's relationship was a little bit surprising to me, given how actively the software cloud business has been growing with the Copilot adoption. So I was kind of intrigued by that breakdown if you could provide us here. Thank you so much. Yeah. Yeah. Our software and cloud business is very diverse. As you'd imagine, in the software world, there's a really long tail of partners. And I could give you the top 10. The other bucket, though, is actually really big. There's a lot of organizations where we're managing dozens or even hundreds of software titles for them. So when you look at our overall software and cloud business, including AWS and Google, the bucket of non-Microsoft is actually the same size or larger than the Microsoft bucket. So there's a lot going on in these other software vendors. And it spans anything from what we call our workplace productivity software, like an Adobe or a RingCentral or somebody like Zoom, to our hybrid cloud software. Obviously, the legacy strong relationship we have with VMware. There's some great Cisco solutions in the hybrid cloud side around virtualization of what's going on in the environment. And then obviously, cybersecurity, which, as we've said in the past, is a large and rapidly growing spend category for us. So again, in that cybersecurity, we're working with all of the biggest names in the industry. So there's a lot of software that we provide and support for our customers outside of what we're doing with Microsoft. I think Microsoft becomes this great platform for us to build off of in that conversation because it's often a significant spend in the customer's environment. But from there, our objective is then to help customers across their entire software and cloud environment. That's very helpful. I just have one quick last one for Jonathan. Jonathan, could you help us understand what's going on with the cash flow from operations? I understand there is this $20 million increase in cash taxes that has been pressuring the cash flow from operations and the free cash flow. But I appreciate if you could elaborate that a little bit more here. And that'll be all for me. Thank you. Sure. Thank you for the question, Divya. Overall, our cash flow from operations, I think our LTM is still in that $100 million range. And it's certainly been stemming from the great work that the team is doing around managing working capital. When you dig in, there has been a higher amount of tax-related cash outflows. And I really stem it into kind of two-ish or maybe even three buckets. The first bucket would be that there were payments this year. As you can imagine, you make installments in the prior year, and then you do a true-up. So there were payments this year related to the true-up from 2023. The second big item is, as you know, we did a special dividend this year. And that did trigger some withholding taxes. Now, we've done work around that issue to minimize that going forward. So we think this is kind of something that is not necessarily repeatable. Hopefully, it will not be repeatable. And then lastly, there was a—you'll see on our balance sheet, actually, $5 million of tax receivables. We actually overpaid, if you will, in the U.S., our installments this year. And so ultimately, in Q4, very little cash outflow from taxes. And we'll benefit from that 5 million into next year. That's great. Thank you. Thank you. We don't have any further questions at this time. I will turn the call back over to Andrew for closing remarks. Please proceed. Thanks, Ivo. And thanks, everybody, for joining us today. We're excited to share our great progress this year, and we look forward to updating you all on our continued progress in the Q4 call in the new year. Have a great rest of your day. This concludes today's conference call. Thank you for your participation, and you may now disconnect.