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Tecsys Reports Financial Results for Second Quarter Fiscal 2020

Record Revenue of $26M as SaaS Bookings Surge

MONTREAL , Dec. 4, 2019 /CNW/ -- Tecsys Inc. (TCS.TO), an industry-leading supply chain management software company, today announced its results for the second quarter of fiscal year 2020, ended October 31, 2019 . All dollar amounts are expressed in Canadian currency and are prepared in accordance with International Financial Reporting Standards (IFRS).

TECSYS (PRNewsfoto/TECSYS)

Second Quarter Highlights:

  • Recurring cloud, maintenance and subscription revenue increased 47% year-over-year to $10.1 million during Q2 2020, including 13% organic SaaS growth.
  • Annual Recurring Revenuei reached $40.5 million at the end of Q2 2020 compared to $27.6 million at the end of Q2 2019. This increase reflects the Company's ongoing focus on the transition to a SaaS revenue and business model which should result in ongoing value creation for shareholders.
  • Total revenue was $26.0 million , higher by 43% or $7.8 million over $18.2 million reported for Q2 2019.
  • Adjusted EBITDAi was $3.7 million , or 14% of revenue, in Q2 2020 compared to $1.7 million , or 9% of revenue in Q2 2019.
  • SaaS subscription bookingsi of $2.4 million were added in Q2 2020 compared to $0.1 million in Q2 2019.
  • Professional services revenue was $10.2 million , 47% higher than $6.9 million in Q2 2019.
  • Proprietary products revenue decreased 30% to $1.7 million compared to Q2 2019 primarily due to a decrease in proprietary software license revenue as the business continues to transition to SaaS licensing. Perpetual license bookings declined to $1.4 million from $2.1 million for the same period last year.
  • Higher service margins increased total gross profit to $13.1 million for Q2 2020, up 37% from $9.5 million in Q2 2019.
  • Gross margin was 50% compared to 52% in the prior year, with the slight decline due to lower license revenue from the organic business resulting from the shift to SaaS bookings as well as a higher mix of lower margin hardware due to the PCSYS acquisition.
  • Operating expenses increased by $2.2 million to $10.8 million , a 25% increase compared to $8.7 million reported in Q2 fiscal 2019.
  • Profit from operations was $2.2 million , compared to a profit of $0.8 million in Q2 2019. Recurring revenue generated by increasing cloud, maintenance, and subscription licensing allows the company to derive higher revenue from stable operations. As our SaaS bookings increase, profit from operations should build predictably over time with fewer quarterly swings.
  • Net Profit in Q2 2020 was $1.4 million or $0.11 per share compared to profit of $0.6 million or $0.05 per share for the same period in fiscal 2019.
  • Total backlogi at October 31, 2019 was $87.0 million , up sequentially from $76.4 million at July 31, 2019 .
  • Total contract value bookingsi increased by 72% to $27.9 million in Q2 2020, up from $16.2 million in Q2 2019. During Q2 2020, the Company signed 10 new accounts with a total contract value of $15.6 million compared to 6 new accounts with a total contract value of $1.3 million signed in Q2 2019.

"This was an exciting quarter.  The strong results for second quarter fiscal 2020 reflect our successful ongoing transition to SaaS licensing," said Peter Brereton , president and CEO of Tecsys Inc. "We are experiencing strong demand across all lines of business and our recent acquisitions have proven to be effective contributors to growth and earnings. Our healthcare solutions continue to perform well as we added another new hospital network (IDN) during the quarter.

We are particularly pleased with the SaaS bookings during the quarter.  We booked $2.35 million of SaaS annual recurring revenue during the second quarter of which $1.5 million was organic.  Under the old model, the organic component would have added approximately $3.0 million to revenue and $2.7 million to earnings, whereas, under the new SaaS model, this all drives future stable revenue growth.  On the ecommerce front, our Distributed Order Management platform processed more than $60 million worth of orders during the Black Friday period on behalf of our clients, up from $40 million last year.  We also held the largest user conference in our history towards the end of September with attendees and partners from a wide range of industry sectors."

Mark Bentler , chief financial officer of Tecsys Inc., added, "As we continue to transition our revenue base to a higher-quality, stable, recurring SaaS licensing model, we are pleased that the operating leverage that we planned for is beginning to be reflected in our results. We also note that our strong Q2 2020 financial results were impacted positively by both of our two recent acquisitions, OrderDynamics and PCSYS."

Results from operations










Trailing 12


Trailing 12


3 months ended


3 months ended


6 months ended


6 months ended


months ended


months ended


October 31, 2019


October 31, 2018


October 31, 2019


October 31, 2018


October 31, 2019


October 31, 2018














Total Revenue

$

26,008

$

18,184

$

50,258

$

34,466

$

92,241

$

70,601

Cloud, Maintenance and Subscription Revenue


10,063


6,836


19,845


13,827


37,300


27,291

Gross Profit


13,055


9,510


24,588


17,094


44,935


34,779

Gross Margin %


50%


52%


49%


50%


49%


49%

Operating Expenses


10,839


8,686


21,869


16,368


44,740


31,459

Op. Ex. As % of Revenue


42%


48%


44%


47%


49%


45%

Profit from Operations


2,216


824


2,719


726


195


3,320

Adjusted EBITDA1


3,677


1,654


5,672


2,190


6,258


5,809

EPS


0.11


0.05


0.09


0.05


(0.02)


0.24














Bookings


27,911


16,226


41,918


26,865


78,264


53,620

   License Booking


1,413


2,138


1,806


3,101


4,639


7,201

   SAAS ARR Bookings


2,350


83


2,730


83


4,275


156














Backlog


87,017


51,657


87,017


51,657


87,017


51,657

   Annual Recurring Revenue


40,499


27,603


40,499


27,603


40,499


27,603

   Professional Services Backlog


22,142


20,192


22,142


20,192


22,142


20,192

First Half Highlights:

  • First half recurring cloud, maintenance and subscription revenue increased by 44% to $19.8 million from $13.8 million reported for first half of fiscal 2019.
  • Total revenue in the first half of fiscal 2020 increased by 46% to $50.3 million from $34.5 million in the prior period.
  • Adjusted EBITDAi for the first half of fiscal 2020 increased by 159% to $5.7 million from $2.2 million in the prior period.
  • SaaS subscription bookingsi increased to $2.7 million in the first half of fiscal 2020 from $0.1 million in the first half of fiscal 2019.
  • Net profit in the first half of fiscal 2020 increased 87% to $1.1 million compared to $0.6 million in the same period last year.
  • Total contract value bookingsi in the first half of fiscal 2020 increased by 56% to $41.9 million , up from $26.9 million in the prior year period. During the first half of fiscal 2020, the Company signed 18 new accounts with a total contract value of $19.0 million compared to 9 new accounts with a total contract value of $3.2 million in the same period last year.

Today the Company declared an increase in the quarterly dividend of $0.005 to $0.06 per share payable on January 10, 2020 to shareholders of record at the close of business on December 19, 2019 .

Pursuant to the Canadian Income Tax Act, dividends paid by the Company to Canadian residents are considered to be "eligible" dividends.

Second Quarter Fiscal 2020 Results Conference Call
Date: December 5, 2019
Time: 8:30 am
Phone number: (416) – 359 3130 or 1 (800) 659 2165
The call can be replayed until December 12, 2019 by calling (416) 626 4100 or 1 (800) 558 5253 (access code:21933974).

About Tecsys

Tecsys is a global provider of transformative supply chain solutions that equip growing organizations with industry-leading services and tools to achieve operational greatness. Tecsys' solutions are designed to create clarity out of the complex supply chain challenges that organizations face with increases in scale, customer expectations and inventory. Built on an enterprise platform, Tecsys solutions include warehouse management, distribution and transportation management, supply management at point-of-use, retail order management, as well as complete financial management and analytics solutions. Through the co-creation of a more responsive supply chain, Tecsys ensures that growth-minded organizations have the chance to thrive and reach their aspirations. For more information on Tecsys' supply chain solutions, visit: www.tecsys.com

Over 1,000 customers trust their supply chains to Tecsys in the healthcare, retail, service parts, third-party logistics, and general wholesale high-volume distribution industries. Tecsys' shares are listed on the Toronto Stock Exchange under the ticker symbol TCS.

Forward Looking Statements

The statements in this news release relating to matters that are not historical fact are forward looking statements that are based on management's beliefs and assumptions. Such statements are not guarantees of future performance and are subject to a number of uncertainties, including but not limited to future economic conditions, the markets that Tecsys Inc. serves, the actions of competitors, major new technological trends, and other factors beyond the control of Tecsys Inc., which could cause actual results to differ materially from such statements. More information about the risks and uncertainties associated with Tecsys Inc.'s business can be found in the MD&A section of the Company's annual report and annual information form for the fiscal year ended April 30th, 2019 . These documents have been filed with the Canadian securities commissions and are available on our website (www.tecsys.com) and on SEDAR (www.sedar.com).

Copyright © Tecsys Inc. 2019. All names, trademarks, products, and services mentioned are registered or unregistered trademarks of their respective owners.

Non-IFRS Measures

Reconciliation of EBITDA and adjusted EBITDA

EBITDA is calculated as earnings before interest expense, interest income, income taxes, depreciation and amortization. Adjusted EBITDA is calculated as EBITDA before acquisition related costs, fair value adjustment on contingent consideration, stock-based compensation and restructuring costs. The Company believes that these measures are commonly used by investors and analysts to measure a company's performance, its ability to service debt and to meet other payment obligations, or as a common valuation measurement.

The EBITDA and Adjusted EBITDA calculations, for the three and six-month periods ending October 31 of fiscal 2020 and 2019, derived from IFRS measures in the Company's condensed interim consolidated financial statements, is as follows:



Three-months
ended

October 31,
2019

Three-months
ended

October 31,
2018

Six-months
ended

October 31,
2019

Six-months
ended

October 31,
2018

Profit for the period


$    1,404

$        596

$     1,137

$       609

Adjustments for:






   Depreciation of property and equipment
         and right-of-use assets


480

212

957

435

   Amortization of deferred development costs


151

280

313

558

   Amortization of other intangible assets


325

121

738

243

   Interest expense


290

-

571

-

   Interest income


(18)

(64)

(46)

(145)

   Income taxes


529

277

878

258







EBITDA


$     3,161

$     1,422

$     4,548

$     1,958

Adjustments for:






   Stock-based compensation


345

117

533

117

   Restructuring costs


-

-

420

-

   Fair value adjustment on contingent consideration
         earnout - PCSYS


171

-

171

-

   Acquisition-related costs


-

115

-

115







Adjusted EBITDA


$     3,677

$       1,654

$     5,672

$     2,190

 

Tecsys Inc.

Condensed Interim Consolidated Statements of Financial Position

(Unaudited)

As at October 31, 2019 and April 30, 2019

(in thousands of Canadian dollars)





October 31,


April 30,




2019


2019







Assets












Current assets






Cash and cash equivalents


$

12,153

$

14,913

Accounts receivable



16,243


14,986

Work in progress



474


811

Other receivables



706


392

Tax credits



4,970


3,493

Inventory



835


673

Prepaid expenses



4,313


3,223

Total current assets



39,694


38,491







Non-current assets






Other long-term receivables



453


278

Tax credits



5,568


5,260

Property and equipment



2,623


2,714

Right-of-use assets



7,892


-

Deferred development costs



1,106


1,064

Other intangible assets



13,908


14,706

Goodwill



17,344


17,456

Deferred tax assets



5,878


5,476

Total non-current assets



54,772


46,954







Total assets


$

94,466

$

85,445







Liabilities












Current liabilities






   Accounts payable and accrued liabilities


$

12,263

$

11,633

Deferred revenue



14,619


14,252

Current portion of long-term debt



1,172


1,022

Lease obligations



925


-

Other current liabilities



4,223


4,111

Total current liabilities



33,202


31,018







Non-current liabilities






   Long-term debt



10,204


10,827

Other non-current liabilities



2,093


2,333

Lease obligations



8,788


-

Deferred tax liabilities



1,753


1,769

Total non-current liabilities



22,838


14,929

Total liabilities



56,040


45,947







Equity












   Share capital



19,144


19,144

   Contributed surplus



10,476


9,943

   Retained earnings



9,199


10,618

Accumulated other comprehensive income loss



(393)


(207)

Total equity attributable to the owners of the Company



38,426


39,498







Total liabilities and equity


$

94,466

$

85,445

 

Tecsys Inc.

Condensed Interim Consolidated Statements of Income and Comprehensive Income

(Unaudited)

Three and six-month periods ended October 31, 2019 and 2018

(in thousand of Canadian dollars, except per share data)





Three

months


Three
months


Six

months


Six

months




Ended


Ended


Ended


Ended




October 31,


October 31,


October 31,


October 31,




2019


2018


2019


2018











Revenue:




















Proprietary products


$

1,726

$

2,461

$

2,170

$

3,786

Third-party products



3,592


1,356


7,244


2,812

Cloud, maintenance and subscription



10,063


6,836


19,845


13,827

Professional services



10,169


6,931


19,911


12,998

Reimbursable expenses



458


600


1,088


1,043

Total revenue



26,008


18,184


50,258


34,466











Cost of revenue:










Products



2,795


1,369


5,757


2,644

Services



9,700


6,705


18,825


13,685

Reimbursable expenses



458


600


1,088


1,043

Total cost of revenue



12,953


8,674


25,670


17,372











Gross profit



13,055


9,510


24,588


17,094











Operating expenses:










Sales and marketing



4,807


4,100


9,315


7,534

General and administration



2,437


1,931


4,821


3,511

Research and development, net of tax credit



3,595


2,655


7,313


5,323

Restructuring costs



-


-


420


-

Total operating expenses



10,839


8,686


21,869


16,368











Profit from operations



2,216


824


2,719


726











Net finance costs (income)



283


(49)


704


(141)











Profit before income taxes



1,933


873


2,015


867











Income tax expense



529


277


878


258





















Profit attributable to the owners of the Company


$

1,404

$

596

$

1,137

$

609











Other comprehensive (loss) income:










Effective portion of changes in fair value on designated revenue hedges



(18)


(44)


118


6

Exchange differences on translation of foreign operations



53


-


(304)


-











Comprehensive income attributable to the owners of the Company


$

1,439

$

552

$

951

$

615











Basic and diluted earnings per common share


$

0.11

$

0.05

$

0.09

$

0.05

 

Tecsys Inc.

Condensed Interim Consolidated Statements of Cash Flows

(Unaudited)

Three and six-month periods ended October 31, 2019 and 2018

(in thousand of Canadian dollars)





Three months


Three months


Six months


Six months




Ended


Ended


Ended


Ended




October 31,


October 31,


October 31,


October 31,




2019


2018


2019


2018











Cash flow from (used in) operating activities:










Profit for the period


$

1,404

$

596

$

1,137

$

609

Adjustments for:










Depreciation of property and equipment and right-of-use assets



480


212


957


435

Amortization of deferred development costs



151


280


313


558

Amortization of other intangible assets



325


121


738


243

Net finance costs (income)



283


(49)


704


(141)

Unrealized foreign exchange and other



(333)


(113)


(585)


29

Non-refundable tax credits



(510)


(248)


(746)


(475)

Stock-based compensation



345


117


533


117

Income taxes



207


265


556


265

Net cash from operating activities excluding changes in non-cash working capital items related to operations



2,352


1,181


3,607


1,640











Accounts receivable



(3,066)


(915)


(1,310)


454

Work in progress



191


374


330


(283)

Other receivables



253


262


(461)


78

Tax credits



(347)


(740)


(1,038)


(1,417)

Inventory



(177)


44


(163)


267

Prepaid expenses



(421)


(18)


(854)


(429)

Accounts payable and accrued liabilities



1,815


35


433


(818)

Deferred revenue



847


(1,518)


384


139

Changes in non-cash working capital items related to operations



(905)


(2,476)


(2,679)


(2,009)











Net cash from (used in) operating activities



1,447


(1,295)


928


(369)











Cash flow (used in) financing activities:










Repayment of long-term debt



(236)


(11)


(472)


(23)

Payment of dividends



(1,439)


(1,308)


(1,439)


(1,308)

Payment of lease obligations



(243)


-


(485)


-

Interest paid



(248)


-


(489)


-

Net cash used in financing activities



(2,166)


(1,319)


(2,885)


(1,331)











Cash flows (used in) investing activities:










Interest received



17


64


46


145

Acquisition of property and equipment



(232)


(66)


(359)


(103)

Acquisition of other intangible assets



(72)


(48)


(135)


(65)

Deferred development costs



(189)


(10)


(355)


(65)

Net cash used in investing activities



(476)


(60)


(803)


(88)











Net decrease in cash and cash equivalents during the period



(1,195)


(2,674)


(2,760)


(1,788)











Cash and cash equivalents – beginning of period



13,348


14,382


14,913


13,496











Cash and cash equivalents – end of period


$

12,153

$

11,708

$

12,153

$

11,708

 

Tecsys Inc.

Condensed Interim Consolidated Statements of Changes in Equity

(Unaudited)

Six-month periods ended October 31, 2019 and 2018

(in thousand of Canadian dollars, except per share data)



 

 

 

Share capital


 

 

Contributed
surplus


Accumulated
other
comprehensive
income (loss)


 

 

Retained
earnings

 

Total



Number


Amount





















Balance, April 30, 2019


13,082,376

$

19,144

$

9,943

$

(207)

$

10,618

$

39,498

 

Adjustment on initial application of IFRS 16


-


-


-


-


(1,117)


(1,117)

Adjusted balance, May 1, 2019


13,082,376


19,144


9,943


(207)


9,501


38,381

 

Profit for the period


-


-


-


-


1,137


1,137

Other comprehensive income for the period:













Effective portion of changes in fair value on designated revenue hedges


-


-


-


118


-


118

Exchange difference on translation of foreign operations


-


-


-


(304)


-


(304)

Stock-based compensation


-


-


533


-


-


533

Total comprehensive income (loss) for the period


-


-


533


(186)


1,137


1,484

 Dividends to equity owners


-


-


-


-


(1,439)


(1,439)

Total transaction with owners of the Company


-


-


-


-


(1,439)


(1,439)














Balance, October 31, 2019


13,082,376

$

19,144

$

10,476

$

(393)

$

9,199

$

38,426














 

Balance, April 30, 2018


13,082,376

$

19,144

$

9,577

$

(113)

$

14,527

$

43,135

 

Adjustment on initial application of IFRS 15


-


-


-


-


(421)


(421)

Adjusted balance, May 1, 2018


13,082,376


19,144


9,577


(113)


14,106


42,714

 

Profit for the period


-


-


-


-


609


609

Other comprehensive income for the period:













Effective portion of changes in fair value on designated revenue

hedges


-


-


-


6


-


6

Stock-based compensation






117


-


-


117

Total comprehensive income (loss) for the period


-


-


117


6


609


732

Dividends to equity owners


-


-


-


-


(1,308)


(1,308)

Total transaction with owners of the Company


-


-


117


-


(1,308)


(1,308)

Balance, October 31, 2018 


13,082,376

$

19,144

$

9,694

$

(107)

$

13,407

$

42,138


i See Key Performance Indicators and Non-IFRS Performance Measures in Management's Discussion and Analysis of the April 30, 2019 Financial Statements

 

SOURCE Tecsys Inc.


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