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Tecsys Reports Financial Results for Third Quarter Fiscal 2020

Record Q3 Revenue of $26.8M with continued strength in SaaS Bookings; year to date Adjusted EBITDA increases 4X to $8.3 million

MONTREAL , Feb. 27, 2020 /CNW/ -- Tecsys Inc. (TCS.TO), an industry-leading supply chain management software company, today announced its results for the third quarter of fiscal year 2020, ended January 31, 2020 . All dollar amounts are expressed in Canadian currency and are prepared in accordance with International Financial Reporting Standards (IFRS).

TECSYS (PRNewsfoto/TECSYS)

Third Quarter Highlights:

  • Recurring cloud, maintenance and subscription revenue increased 31% year-over-year to $10.6 million during Q3 2020, including 14% organic SaaS growth.
  • Annual Recurring Revenuei reached $42.5 million in Q3 2020 compared to $32.7 million in Q3 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 a record $26.8 million , higher by 43% or $8.1 million over $18.8 million reported for Q3 2019.
  • Adjusted EBITDAi was $2.6 million , or 10% of revenue, in Q3 2020 compared to ($0.1) million , or (1%) of revenue in Q3 2019.
  • SaaS subscription bookingsi of $2.0 million were added in Q3 2020 compared to $0.5 million in Q3 2019.
  • Professional services revenue was $9.9 million , 35% higher than $7.3 million in Q3 2019.
  • Proprietary products revenue, comprised primarily of perpetual license revenue, remained flat at $1.5 million compared to Q3 2019 in spite of strong SaaS bookings and continued transition to SaaS licensing.
  • Higher service margins increased total gross profit to $12.8 million for Q3 2020, up 36% from $9.4 million in Q3 2019.
  • Gross margin was 48% compared to 50% in the prior year, with the decline due to a higher mix of lower margin hardware due primarily to the PCSYS acquisition.
  • Operating expenses increased by $0.3 million to $11.4 million , a 3% increase compared to $11.1 million reported in Q3 fiscal 2019.
  • Profit from operations was $1.4 million , compared to a loss of ($1.7) million in Q3 2019.
  • Net Profit in Q3 2020 was $0.8 million or $0.06 per share compared to a loss of ($1.4) million or ($0.11) per share for the same period in fiscal 2019.
  • Total backlogi at January 31, 2020 was $98.2 million , up sequentially from $87.0 million at October 31, 2019 .
  • Total contract value bookingsi increased by 75% to $29.9 million in Q3 2020, up from $17.1 million in Q3 2019. During Q3 2020, the Company signed 8 new accounts with a total contract value of $8.3 million compared to 7 new accounts with a total contract value of $5.6 million signed in Q3 2019.

 


i See Key Performance Indicators and Non-IFRS Performance Measures in Management's Discussion and Analysis of the 2020 Financial Statements



"We are actively transforming Tecsys into a global SaaS software company.  Our acquisitions are successfully integrating and we are winning in Europe , in North America and across all of our verticals.  We are pleased to continue this excellent momentum of delivering another strong quarter of financial results. We are experiencing strong SaaS bookings for new customers and we are starting to see SaaS bookings from our existing customers that have made the decision to migrate to SaaS.  This not only creates added recurring revenue but also increases our ability to provide world-class value to those customers.  All verticals contributed nicely to the results, with new hospital networks joining us, an existing network expanding very significantly and some great wins in complex distribution" said Peter Brereton , President and CEO of Tecsys Inc. "We continue to successfully drive operational efficiencies, focus on long-term profitable growth, and deliver superior returns to our shareholders."

Mark Bentler , Chief Financial Officer of Tecsys Inc., added, "We are pleased with another record setting bookings and revenue quarter and continued strength in SaaS results.  Our year to date operating results are ahead of our plan.  We continue to transition our revenue base away from a perpetual license model and towards a higher-quality, stable, recurring SaaS licensing model.  This will have an impact on operating results in the intermediate term.  We believe that this accelerated transition to SaaS will provide an excellent outcome for both customers and shareholders."

First Nine Months of fiscal 2020 Highlights:

  • First nine months recurring cloud, maintenance and subscription revenue increased by 39% to $30.4 million from $21.9 million reported for first nine months of fiscal 2019.
  • Total revenue in the first nine months of fiscal 2020 increased by 45% to $77.1 million from $53.3 million in the prior year period.
  • Adjusted EBITDAi for the first nine months of fiscal 2020 increased by 298% to $8.3 million from $2.1 million in the prior year period.
  • SaaS subscription bookingsi increased almost 8x to $4.7 million in the first nine months of fiscal 2020 from $0.6 million in the first nine months of fiscal 2019.
  • Net profit in the first nine months of fiscal 2020 increased to $2.0 million compared to a net loss of ($0.8) million in the same period last year.
  • Total contract value bookingsi in the first nine months of fiscal 2020 increased by 63% to $71.8 million , up from $44.0 million in the prior year period. During the first nine months of fiscal 2020, the Company signed 26 new accounts with a total contract value of $27.3 million , up 214% on a dollar basis compared to 15 new accounts with a total contract value of $8.7 million in the same period last year.

 

Results from operations










Trailing 12


Trailing 12


3 months ended


3 months ended


9 months ended


9 months ended


months ended


months ended


January 31, 2020


January 31, 2019


January 31, 2020


January 31, 2019


January 31, 2020


January 31, 2019














Total Revenue

$

26,847

$

18,792

$

77,105

$

53,258

$

100,296

$

72,166

Cloud, Maintenance and Subscription Revenue


10,575


8,095


30,420


21,922


39,780


28,817

Gross Profit


12,834


9,438


37,422


26,532


48,331


36,097

Gross Margin %


48%


50%


49%


50%


48%


50%

Operating Expenses


11,439


11,125


33,308


27,493


45,054


35,309

Op. Ex. As % of Revenue


43%


59%


43%


52%


45%


49%

Profit from Operations


1,395


(1,687)


4,114


(961)


3,277


788

Adjusted EBITDA 1


2,648


(98)


8,320


2,092


9,004


4,399

EPS


0.06


(0.11)


0.15


(0.06)


0.16


0.07














Bookings


29,941


17,098


71,798


43,963


91,046


58,694

   License Booking


1,524


1,587


3,330


4,689


4,575


7,915

   SAAS ARR Bookings


1,952


503


4,683


613


5,698


659














Backlog


98,166


69,323


98,166


69,323


98,166


69,323

   Annual Recurring Revenue


42,471


32,665


42,471


32,665


42,471


32,665

   Professional Services Backlog


24,262


23,855


24,262


23,855


24,262


23,855

Today the Company declared a quarterly dividend of $0.06 per share payable on April 9, 2020 to shareholders of record at the close of business on March 19, 2020 .

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

Third Quarter 2020 Results Conference Call

Date: February 28, 2020
Time: 8:30 am EST
Phone number: (416) 981 0147 or (888) 223 5127
The call can be replayed until March 6, 2020 by calling (416) 626 4100 or (800) 558 5253 (access code: 21952932).

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 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.

Customers around the world trust their supply chains to Tecsys in the healthcare, 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 nine-month periods ending January 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

January 31,
2020

Three-months
ended

January 31,
2019

Nine-months
ended

January 31,
2020

Nine-months
ended

January 31,
2019

Profit for the period


$      834

$    (1,429)

$     1,971

$      (820)

Adjustments for:






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


506

214

1,463

649

   Amortization of deferred development costs


104

219

417

777

   Amortization of other intangible assets


394

259

1,132

502

   Interest expense


267

9

838

9

   Interest income


(16)

(26)

(62)

(171)

   Income taxes


282

(258)

1,160

-







EBITDA


$     2,371

$    (1,012)

$     6,919

$       946

Adjustments for:






  Stock-based compensation


277

142

810

259

  Restructuring costs


-

-

420

-

  Fair value adjustment on contingent consideration earnout - PCSYS


-

-

171

-

  Acquisition-related costs


-

772

-

887







Adjusted EBITDA


$     2,648

$      (98)

$     8,320

$     2,092

 

Tecsys Inc.

Condensed Interim Consolidated Statements of Financial Position

(Unaudited)

As at January 31, 2020 and April 30, 2019

(in thousands of Canadian dollars)






January 31,


April 30,



Note


2020


2019








Assets














Current assets







Cash and cash equivalents



$

11,948

$

14,913

Accounts receivable




16,460


14,986

Work in progress




670


811

Other receivables




626


392

Tax credits




5,775


3,493

Inventory




809


673

Prepaid expenses




5,031


3,223

Total current assets




41,319


38,491








Non-current assets







Other long-term receivables




376


278

Tax credits




5,716


5,260

Property and equipment




2,713


2,714

Right-of-use assets




7,635


-

Deferred development costs




1,152


1,064

Other intangible assets




13,532


14,706

Goodwill




17,343


17,456

Deferred tax assets




5,862


5,476

Total non-current assets




54,329


46,954








Total assets



$

95,648

$

85,445








Liabilities














Current liabilities







   Accounts payable and accrued liabilities



$

14,321

$

11,633

Deferred revenue




15,023


14,252

Current portion of long-term debt




1,239


1,022

Lease obligations




850


-

Other current liabilities




4,569


4,111

Total current liabilities




36,002


31,018








Non-current liabilities







   Long-term debt




9,900


10,827

Other non-current liabilities




628


2,333

Lease obligations




8,618


-

Deferred tax liabilities




1,753


1,769

Total non-current liabilities




20,899


14,929

Total liabilities




56,901


45,947








Equity














   Share capital




19,158


19,144

   Contributed surplus




10,750


9,943

   Retained earnings




9,248


10,618

Accumulated other comprehensive income loss




(409)


(207)

Total equity attributable to the owners of the Company




38,747


39,498








Total liabilities and equity



$

95,648

$

85,445

 

Tecsys Inc.

Condensed Interim Consolidated Statements of Income and Comprehensive Income

(Unaudited)

Three and nine-month periods ended January 31, 2020 and 2019

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






Three

months


Three
months


Nine

months


Nine

months





Ended


Ended


Ended


Ended





January 31,


January 31,


January 31,


January 31,



Note


2020


2019


2020


2019












Revenue:






















Proprietary products



$

1,520

$

1,556

$

3,690

$

5,342

Third-party products




4,397


1,316


11,641


4,128

Cloud, maintenance and subscription




10,575


8,095


30,420


21,922

Professional services




9,882


7,338


29,793


20,336

Reimbursable expenses




473


487


1,561


1,530

Total revenue




26,847


18,792


77,105


53,258












Cost of revenue:











Products




3,530


1,015


9,287


3,659

Services




10,010


7,852


28,835


21,537

Reimbursable expenses




473


487


1,561


1,530

Total cost of revenue




14,013


9,354


39,683


26,726












Gross profit




12,834


9,438


37,422


26,532












Operating expenses:











Sales and marketing




5,451


4,612


14,766


12,146

General and administration




2,363


3,007


7,184


6,518

Research and development, net of tax credit




3,625


3,506


10,938


8,829

Restructuring costs




-


-


420


-

Total operating expenses




11,439


11,125


33,308


27,493












Profit (loss) from operations




1,395


(1,687)


4,114


(961)












Net finance costs (income)




279


-


983


(141)












Profit (loss) before income taxes




1,116


(1,687)


3,131


(820)












Income tax expense (benefit)




282


(258)


1,160


-























Profit (loss) attributable to the owners of the Company



$

834

$

(1,429)

$

1,971

$

(820)












Other comprehensive (loss) income:











Effective portion of changes in fair value on designated revenue hedges




(49)


122


69


128

Exchange differences on translation of foreign operations




33


-


(271)


-












Comprehensive income (loss) attributable to the owners of the Company



$

818

$

(1,307)

$

1,769

$

(692)












Basic and diluted earnings (loss) per common share



$

0.06

$

(0.11)

$

0.15

$

(0.06)


























 

Tecsys Inc.

Condensed Interim Consolidated Statements of Cash Flows

(Unaudited)

Three and nine-month periods ended January 31, 2020 and 2019

(in thousand of Canadian dollars)






Three

months


Three

months


Nine
months


Nine
months





Ended


Ended


Ended


Ended





January 31,


January 31,


January 31,


January 31,



Note


2020


2019


2020


2019












Cash flow from (used in) operating activities:











Profit for the period



$

834

$

(1,429)

$

1,971

$

(820)

Adjustments for:











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




506


214


1,463


649

Amortization of deferred development costs




104


219


417


777

Amortization of other intangible assets




394


259


1,132


502

Net finance costs (income)




279


-


983


(141)

Unrealized foreign exchange and other




(12)


(261)


(597)


(232)

Non-refundable tax credits




(297)


(201)


(1,043)


(676)

Stock-based compensation




277


142


810


259

Income taxes




249


(265)


805


-

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




2,334


(1,322)


5,941


318












Accounts receivable




(214)


(379)


(1,524)


75

Work in progress




(196)


(392)


134


(675)

Other receivables




157


77


(304)


155

Tax credits




(656)


(755)


(1,694)


(2,172)

Inventory




26


111


(137)


378

Prepaid expenses




(606)


45


(1,460)


(384)

Accounts payable and accrued liabilities




1,683


2,047


2,116


1,229

Deferred revenue




404


1,076


788


1,215

Changes in non-cash working capital items related to operations




598


1,830


(2,081)


(179)












Net cash from operating activities




2,932


508


3,860


139












Cash flow (used in) financing activities:











Repayment of long-term debt




(238)


(12)


(710)


(35)

Payment of dividends




(785)


(720)


(2,224)


(2,028)

Proceeds from long-term debt




-


12,000


-


12,000

Payment of lease obligations




(246)


-


(731)


-

Interest paid




(226)


-


(715)


-

Net cash (used in) from financing activities




(1,495)


11,268


(4,380)


9,937












Cash flows (used in) investing activities:











Interest received




17


27


63


172

Long-term investments




-


10,000


-


10,000

Business acquisition




(1,146)


(9,880)


(1,146)


(9,880)

Increase in restricted cash




-


(12,000)


-


(12,000)

Acquisition of property and equipment




(344)


(166)


(703)


(269)

Acquisition of other intangible assets




(19)


(27)


(154)


(92)

Deferred development costs




(150)


(22)


(505)


(87)

Net cash used in investing activities




(1,642)


(12,068)


(2,445)


(12,156)












Net decrease in cash and cash equivalents during the period




(205)


(292)


(2,965)


(2,080)












Cash and cash equivalents – beginning of period




12,153


11,708


14,913


13,496












Cash and cash equivalents – end of period



$

11,948

$

11,416

$

11,948

$

11,416












 

Tecsys Inc.

Condensed Interim Consolidated Statements of Changes in Equity

(Unaudited)

Nine-month periods ended January 31, 2020 and 2019

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



 

 

 

Share capital


 

 

Contributed
surplus


Accumulated
other
comprehensive
income (loss)


 

 

Retained
earnings


 

 

 

Total



Number


Amount










Note











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


-


-


-


-


1,971


1,971

Other comprehensive income for the period:













Effective portion of changes in fair value on designated revenue hedges


-


-


-


69


-


69

Exchange difference on translation of foreign operations


-


-


-


(271)


-


(271)

Stock-based compensation


-


-


810


-


-


810

Total comprehensive income (loss) for the period


-


-


810


(202)


1,971


2,579

 Dividends to equity owners


-


-


-


-


(2,224)


(2,224)

Share options exercised


834


14


(3)


-


-


11

Total transaction with owners of the Company


834


14


(3)


-


(2,224)


(2,213)














Balance, January 31, 2020


13,083,210

$

19,158

$

10,750

$

(409)

$

9,248

$

38,747














Balance, April 30, 2018 1


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


-


-


-


-


(820)


(820)

Other comprehensive income for the period:













Effective portion of changes in fair value on designated revenue hedges


-


-


-


128


-


128

Stock-based compensation






259


-


-


259

Total comprehensive income (loss) for the period


-


-


259


128


(820)


(433)

Dividends to equity owners


-


-


-


-


(2,028)


(2,028)

Total transaction with owners of the Company


-


-


-


-


(2,028)


(2,028)

Balance, January 31, 2019 1


13,082,376

$

19,144

$

9,836

$

15

$

11,258

$

40,253



i See Key Performance Indicators and Non-IFRS Performance Measures in Management's Discussion and Analysis of the 2020 Financial Statements

 

SOURCE Tecsys Inc.


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