The results have been phenomenal. The results we’re seeing a 20% to 25%, 30% improvement in forecast accuracy, which now translates for our clients into millions of dollars of savings. So it’s been phenomenal. And that’s in comparison to our prior applications, our competitors’ prior applications, Excel spreadsheets, anything in the marketplace, we’ll stand toe to toe with. So the results that our clients are achieving with the system itself has been phenomenal. The generative AI, the ability to have human interaction directly with the application, get insights from the application, has been eye-opening, particularly for the executives. It’s fun and exciting for the user community. But for the executives to be able to self-serve and get the kind of insights they need first-hand to make decisions about the direction of the supply chain, has absolutely blown them away.
We’ve got an executive leadership team that’s come together just really wanting to help us. They want to adopt, and they want to help us drive the executives out there and who is a universal hand raising. Who wants to help us continue to proliferate this capability across the platform? Just wildly exciting at the executive level, that’s not at the user level. And as I mentioned in my earlier comments, we didn’t have a lot of runway from the time we signed that contract started to onboard and we ended up with a dozen contract signed during the quarter. In less than a quarter, it was less than half of the quarter that we had available to us. So that was very exciting. So the reception in the marketplace has been strong and even the interest and the conversions.
We got one nailed down already of an upgrade and we’ve got many more lift and shift opportunities on the forefront for that application, just really stimulating that demand. If you can get a 20% forecast error improvement, that pays for itself as far as the lift and shift goes. And lift and shift is a little bit pricey, but it’s value-oriented now, so it’s going to really accelerate that. So probably a much longer answer, Zach, than you expected maybe on that question. But thank you for the question. It was a good one.
Zachary Cummins: Always appreciate it, Allan, and all the incremental color there. And just two more clarifying questions. Vince, when it comes to the guidance, I think you said $15 million was assumed at the start of the year. Is that just related to the proven method? Or is that also to your most recent divestiture as well?
Vincent Klinges: That actually was just The Proven Method. So there was an additional $1 million, $1.5 million.
Zachary Cummins: Got it. Helpful. Got it. Got it. That’s helpful. And then final question for me is, obviously, Garvis is a slight drag on margins here for the next couple of quarters. But just the remaining business, what’s really the right way to think about just what the gross margin profile and the potential adjusted EBITDA margin profile should be for your remaining business now?
Vincent Klinges: From a gross margin point of view, we do see incremental improvement in the subscription fees, but the overall gross margin has been hit by the decline in the services gross margin. But that should mitigate after in the back half of the year, we’ll start to see that improve a little bit. And then with subscription margins improving a little bit too, we should start to see a tick up on the overall gross margin, which means that should translate into adjusted EBITDA, operating EBITDA of going from 15%. Right now, it’s about 14%, 15%, going up to 16%, 17%, 18% somewhere around there by the end of the year.
Zachary Cummins: Got it. That’s helpful. Well, thanks again for taking my questions and best of luck with the rest of the quarter.
Allan Dow: Thank you, Zach. Have a good evening.
Operator: Thank you. Our next question will come from Anja Soderstrom.
Anja Soderstrom: Thank you for taking my question. So you were very busy towards the end of the second quarter. How has that trended in the third quarter so far?
Allan Dow: Well, we’re pretty early in the third quarter, given that we’ve only got 15 days in so far, but we’ve got some progress already. We had a little bit of spill-over from the second quarter into the third quarter already. It’s a nice quarter. We actually — this is traditionally our strongest quarter, Anja. We have essentially three closing events, milestones. We have — we have the end of the calendar year where budget money is available, so people are scrambling right now if they want to get projects kicked off. We have new money available coming in the fiscal new fiscal year, lining up with a calendar year. So early January. And then we have the — the unnatural thing that the software companies have always done is that you always get business contracts signed at the end of the fiscal quarter.
So that comes at the end of January for us. So that’s always resulted in a strong third quarter for us. Almost every year, if you go back for 20 years that Vince and I have been kicking around here, we see the normal trend. It’s not every year, but the majority of the year’s third quarter is the best. And — so we’re seeing some of that going on right now. We’re seeing those projects get going. And we added quite a bit that spilled over from the quarter that we thought might have been closable in second quarter that’s spilled into third. And we’ve just seen an uptick in overall pipeline from two aspects. One, the Garvis acquisition, we think, has had a — we know we have the measures for it. It’s had a pretty healthy impact on our overall pipeline and then just the New Year start.
