Financial Data and Key Metrics Changes - The company has adjusted its net dollar retention expectations from 103% to 93% due to pricing pressure and client behavior changes during the Egnyte migration [15][19][22] - The average sales benchmark (ASB) has shifted to the lower end of the range, now between $300,000 and $700,000, primarily due to tighter scoping rather than lower gross margins, which remain strong at over 80% [27][29] Business Line Data and Key Metrics Changes - The company has added 22 new platform clients since the beginning of the year, bringing the total to 152 platform clients [23] - The focus for cross-selling is on adjacent applications, particularly in the finance category, which offers clear near-term ROI for clients [31][32] Market Data and Key Metrics Changes - Many clients are currently using the 2026 budgeting cycle to reassess their needs and strategies in light of recent Medicaid cuts and funding changes [20] - The company is experiencing a stronger start to Q3 compared to typical quiet quarters, indicating potential recovery in client engagement [18] Company Strategy and Development Direction - The company is focusing on leveraging its existing client relationships to roll out AI capabilities without requiring new contracts, capitalizing on its incumbency advantage [52] - There is a strategic shift towards tech-led solutions, with a goal to increase the proportion of revenue from technology services compared to professional services [42] Management's Comments on Operating Environment and Future Outlook - Management acknowledges that the current macro environment is challenging, particularly for not-for-profit health systems, which are slower to adapt to significant funding cuts [16] - The company expects the headwind to dollar-based retention to be a near-term issue, with a return to over 100% retention anticipated by 2027 [26][22] Other Important Information - The company has identified over $40 million in savings from a recent restructuring, which will positively impact EBITDA in the upcoming quarters [49][54] - There is no anticipated further M&A activity in the near to mid-term, as the company focuses on digesting recent acquisitions and maximizing cross-sell opportunities [58] Q&A Session Summary Question: What is the impact of the Egnyte migration on dollar-based retention? - Management explained that the migration has led to a reduction in dollar-based retention due to clients opting for immediate savings rather than cross-selling opportunities [15][19] Question: How is the company addressing the tighter scoping in sales? - The company noted that while scoping is tighter, it has maintained good gross margins and is still signing meaningful business [29][30] Question: What is the company's strategy regarding professional services? - Management clarified that while they are reducing reliance on professional services, they still see value in providing deep domain expertise where necessary [39][42] Question: How is AI influencing the company's operations? - The company is increasingly using AI in R&D, which is expected to provide significant operating leverage and improve efficiency [48][49] Question: What are the capital strategy priorities moving forward? - The focus is on achieving meaningful free cash flow in 2026, with plans for share repurchase and debt repayment as primary uses of capital [57][58]

Financial Data and Key Metrics Changes - Total revenue for Q1 2025 was $79.4 million, representing a 6% year-over-year increase [26] - Adjusted EBITDA for Q1 2025 was $6.3 million, exceeding guidance [26] - Technology revenue for Q1 2025 was $51.5 million, reflecting a 10% year-over-year growth [27] - Professional services revenue for Q1 2025 was $27.9 million, a 1% increase compared to Q1 2024 [27] - Total adjusted gross margin was 49%, a decrease of approximately 210 basis points year-over-year [27] - Adjusted technology gross margin was 67%, a decrease of approximately 120 basis points year-over-year [27] - Adjusted professional services gross margin was 16%, a decrease of approximately 630 basis points year-over-year [27] Business Line Data and Key Metrics Changes - The technology segment showed strong performance with a 10% revenue growth year-over-year [27] - Professional services revenue growth was modest at 1% year-over-year [27] - The shift to the Ignite platform is expected to enhance profitability, with Ignite clients showing an 80/20 revenue mix favoring technology over services [52] Market Data and Key Metrics Changes - The company added 10 net new platform clients in Q1 2025, with two-thirds coming from existing app clients [6] - The average total ARR and non-recurring revenue per net new platform client was around the midpoint of $300,000 to $700,000 [6][23] - The company anticipates achieving approximately 40 net new platform clients for the full year 2025 [23] Company Strategy and Development Direction - The strategic shift to the Ignite platform is aimed at providing a more flexible, modular, and cost-effective solution compared to the legacy DOS model [8] - Ignite's lower entry price point is expected to accelerate sales cycles and enhance cross-selling opportunities [8] - The company is focusing on organic growth and capital allocation, with a recent $5 million share repurchase [24] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the resilience of Ignite in the face of macroeconomic challenges, including potential funding cuts [20] - The company expects to complete the majority of Ignite migrations by mid-2026, with two-thirds expected by the end of 2025 [11] - Management noted that the operating margins remain strong and stable, despite some uncertainties in the market [19] Other Important Information - The company ended Q1 2025 with $342 million in cash and short-term investments [30] - The face value of the term loan is $162 million, and the convertible notes were paid off in full on April 14, 2025 [30] - The company expects total revenue of approximately $80.5 million and adjusted EBITDA of approximately $8 million for Q2 2025 [31] Q&A Session Summary Question: Can you provide more color on the decision-making process with the modular strategy versus DOS? - The modularity and lower price point of Ignite allow for quicker decision-making and shorter sales cycles, making it easier to provide tangible value to clients [38][39] Question: Should we expect a different cadence in customer additions? - There may be a smoothing of customer additions throughout the year due to the flexibility of the offering, rather than being strictly aligned with budget seasons [44] Question: What is driving the higher weighting of tech versus services in Ignite? - The lower price point and specific use cases associated with Ignite lead to a higher technology-driven solution, requiring less service delivery compared to DOS [49][52] Question: How is the average starting ARR accounted for? - The $300,000 to $700,000 average applies to new net platform clients, with existing clients migrating to Ignite potentially reflecting a headwind in dollar-based retention metrics [57][59] Question: What is the expected timing for tech margins to improve? - An uplift in tech adjusted gross profit margins is expected in the second half of the year as the migration process progresses [80][81]