Tecsys Reports Financial Results for the Third Quarter of Fiscal 2023

Record revenue quarter with SaaS bookings up 152%, year-to-date SaaS bookings up 68%

MONTREAL, March 1, 2023 /CNW/ -- Tecsys Inc. (TSX: TCS), an industry-leading supply chain management SaaS company, today announced its results for the third quarter of fiscal year 2023, ended January 31, 2023. All dollar amounts are expressed in Canadian currency and are prepared in accordance with International Financial Reporting Standards (IFRS).

Third Quarter Highlights:

• SaaS revenue increased by 36% to $9.5 million, up from $7.0 million in Q3 2022.
• SaaS subscription bookingsⁱ (measured on an ARRⁱ basis) increased by 152% to $5.8 million, compared to $2.3 million in the third quarter of fiscal 2022.
• SaaS Remaining Performance Obligation (RPOⁱ) increased by 63% to $128.3 million at January 31, 2023, up from $78.5 million at the same time last year.
• Annual Recurring Revenue (ARRⁱ) at January 31, 2023 was up 27% to $75.4 million compared to $59.5 million at January 31, 2022.
• Professional services revenue was up 5% to $13.6 million compared to $12.9 million in Q3 last year.
• Total revenue excluding hardware revenue was $32.5 million, 12% higher than $29.0 million reported for Q3 last year, while total revenue reached a record $38.9 million.
• Gross margin was 44% compared to 43% in the same period in fiscal 2022.
• Total gross profit increased to $17.0 million, up 12% from $15.2 million in Q3 last year.
• Operating expenses increased to $16.0 million, higher by $2.1 million or 15% compared to $13.9 million in Q3 last year.
• Profit from operations was $1.0 million, down from $1.4 million in Q3 last year.
• Net profit was $0.9 million or $0.06 per share on both a basic and fully diluted basis in Q3 2023 compared to $0.9 million or $0.06 per share in Q3 2022.
• Adjusted EBITDAⁱⁱ was $2.8 million, up 1% compared to $2.7 million reported in Q3 last year. 

"We are pleased to continue our strong momentum through this quarter, supported by both new logo wins and solid base account activity, including major expansions and new SaaS migrations, which continues to contribute favorably to our bookings," said Peter Brereton, president and CEO of Tecsys Inc. "We continue to see healthy pipeline activity that shows a growing demand for our value proposition to our base customers and to the supply chain market as a whole. In light of these favorable market conditions, we continue to invest to drive organic growth." 

Mark Bentler, chief financial officer of Tecsys Inc., added, "Our Q3 performance continues at a solid pace as we drive market expansion and investor value. With a record revenue quarter led by 36% SaaS revenue growth and SaaS bookings up 152%, we are pleased with our topline growth, and we continue to create greater revenue visibility as we grow our RPO, which is up 63% year over year." 

	Three months ended				Nine months ended					Trailing 12 months ended
Results from operations		January 31, 2023		January 31, 2022		January 31, 2023		January 31, 2022		January 31, 2023		January 31, 2022
Total Revenue	$	38,917	$	35,411	$	111,232	$	102,912	$	145,520	$	135,286
Total Revenue Excluding Hardware		32,542		29,024		94,391		85,303		123,561		112,340
SaaS Revenue, Maintenance and Support Revenue		17,900		15,167		51,065		43,911		66,781		57,747
Professional Services Revenue		13,569		12,942		40,739		39,144		53,635		51,319
Gross Profit		17,008		15,233		48,445		45,180		63,575		60,903
Gross Margin %		44 %		43 %		44 %		44 %		44 %		45 %
Operating Expenses		15,968		13,883		46,267		41,115		60,086		54,207
Op. Ex. As % of Revenue		41 %		39 %		42 %		40 %		41 %		40 %
Profit from Operations		1,040		1,350		2,178		4,065		3,489		6,696
Adjusted EBITDA^ii		2,774		2,738		7,035		8,400		8,765		12,317
EPS basic	$	0.06	$	0.06	$	0.11	$	0.13	$	0.29	$	0.27
EPS diluted	$	0.06	$	0.06	$	0.11	$	0.13	$	0.28	$	0.27
License Booking		1,058		515		2,313		1,862		2,853		2,614
SaaS ARR Bookings		5,831		2,315		12,535		7,463		16,992		10,956
Annual Recurring Revenue										75,361		59,540
SaaS RPO										128,313		78,498
Professional Services Backlog										38,167		29,521

Year-to-date performance for first nine months of fiscal 2023:

• SaaS revenue increased by 37% to $26.3 million, up from $19.2 million the same period of fiscal 2022.
• SaaS subscription bookingsⁱ (measured on an ARRⁱ basis) increased to $12.5 million, 68% higher from $7.5 million in the same period of fiscal 2022.
• Professional services revenue for the nine-month period was up 4% to $40.7 million compared to $39.1 million in the same period of fiscal 2022.
• Total revenue excluding hardware revenue was $94.4 million, 11% higher than $85.3 million reported for the same period of fiscal 2022.
• Gross margin was 44% for both periods in fiscal 2023 and fiscal 2022.
• Total gross profit increased to $48.4 million, up 7% from $45.2 million in the same period of fiscal 2022.
• Operating expenses increased to $46.3 million, higher by $5.2 million or 13% compared to $41.1 million in the same period of fiscal 2022.
• Profit from operations was $2.2 million, down from $4.1 million in the same period of fiscal 2022.
• Net profit was $1.6 million or $0.06 per share on both a basic and fully diluted basis in the first nine months of fiscal 2023 compared to a net profit of $1.9 million or $0.13 per share for the same period in fiscal 2022.
• Adjusted EBITDAⁱⁱ was $7.0 million, down 16% compared to $8.4 million reported in the same period in fiscal 2022.

On March 1, 2023, the Company declared a quarterly dividend of $0.075 per share to be paid on April 13, 2023 to shareholders of record on March 23, 2023.

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

ⁱ See Key Performance Indicators in Management's Discussion and Analysis of the Q3 2023 Financial Statements.
ⁱⁱ See Non-IFRS Performance Measures in Management's Discussion and Analysis of the Q3 2023 Financial Statements.

Third Quarter Fiscal 2023 Results Conference Call
Date: March 2, 2023
Time: 8:30am EDT
Phone number: [phone] or [phone]
The call can be replayed until March 9, 2023 by calling:
[phone] or [phone] (access code: 22026120)

About Tecsys

Tecsys is a global provider of cloud-based supply chain solutions that equip the borderless enterprise for growth and competitive advantage. Serving healthcare, distribution and converging commerce industries, and spanning multiple complex, regulated and high-volume markets, Tecsys delivers dynamic and powerful solutions for warehouse management, distribution and transportation management, supply management at point of use, order management and fulfillment, as well as financial management and analytics solutions. 

Tecsys' shares are listed on the Toronto Stock Exchange under the ticker symbol TCS. For more information on Tecsys, visit www.tecsys.com.

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 the most recently filed annual information form. 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. 2023. 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 stock-based compensation, gain on remeasurement of lease liability and recognition of tax credits generated in prior periods. The exclusion of interest expense, interest income and income taxes eliminates the impact on earnings derived from non-operational activities, and the exclusion of depreciation, amortization, share-based compensation, gain on remeasurement of lease liability and recognition of tax credits generated in prior periods eliminates the non-cash impact of these items.

The Company believes that these measures are useful measures of financial performance without the variation caused by the impacts of the items described above and that could potentially distort the analysis of trends in our operating performance. In addition, they 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. Excluding these items does not imply that they are necessarily non-recurring. Management believes these non-GAAP financial measures, in addition to conventional measures prepared in accordance with IFRS, enable investors to evaluate the Company's operating results, underlying performance and future prospects in a manner similar to management. Although EBITDA and Adjusted EBITDA are frequently used by securities analysts, lenders and others in their evaluation of companies, they have limitations as an analytical tool, and should not be considered in isolation, or as a substitute for analysis of the Company's results as reported under IFRS.

The reconciliation of EBITDA and Adjusted EBITDA to the most directly comparable IFRS measure is provided below.

	Three months ended January 31,				Nine months ended January 31,				Trailing 12 months ended January 31,
(in thousands of CAD)		2023		2022		2023		2022		2023		2022
Profit for the period	$	888	$	940	$	1,643	$	1,892	$	4,229	$	3,912
Adjustments for:
Depreciation of property and equipment and right-of-use assets		476		551		1,335		1,647		1,850		2,214
Amortization of deferred development costs		135		80		351		203		438		263
Amortization of other intangible assets		411		408		1,201		1,230		1,583		1,634
Interest expense		92		138		389		444		567		602
Interest income		(221)		(337)		(475)		(417)		(532)		(435)
Income taxes		455		537		869		2,057		(242)		2,573
EBITDA	$	2,236	$	2,317	$	5,313	$	7,056	$	7,893	$	10,763
Adjustments for:
Stock based compensation		538		421		1,722		1,344		2,062		1,554
Gain on remeasurement of lease liability		-		-		-		-		(573)		-
Recognition of tax credits generated in prior periods		-		-		-		-		(617)		-
Adjusted EBITDA^ii	$	2,774	$	2,738	$	7,035	$	8,400	$	8,765	$	12,317

Condensed Interim Consolidated Statements of Financial Position As at January 31, 2023 and April 30, 2022 (Unaudited) (In thousands of Canadian dollars)
		January 31,  2023		April 30,  2022
Assets
Current assets
Cash and cash equivalents		$	12,201	$	23,004
Short-term investments			15,651		20,239
Accounts receivable			24,001		16,962
Work in progress			1,950		1,579
Other receivables			1,404		234
Tax credits			9,793		5,224
Inventory			1,309		806
Prepaid expenses			7,874		6,392
Total current assets			74,183		74,440
Non-current assets
Other long-term receivables			182		192
Tax credits			4,233		3,782
Property and equipment			1,750		2,064
Right-of-use assets			4,295		4,547
Contract acquisition costs			3,895		3,177
Deferred development costs			2,116		1,870
Other intangible assets			9,549		10,301
Goodwill			17,304		16,863
Deferred tax assets			8,617		8,608
Total non-current assets			51,941		51,404
Total assets		$	126,124	$	125,844
Liabilities
Current liabilities
Accounts payable and accrued liabilities		$	19,566	$	16,971
Deferred revenue			29,197		24,689
Current portion of long-term debt			-		1,200
Lease obligations			728		662
Total current liabilities			49,491		43,522
Non-current liabilities
Long-term debt			-		7,200
Deferred tax liabilities			1,350		1,258
Lease obligations			4,805		5,181
Total non-current liabilities			6,155		13,639
Total liabilities		$	55,646	$	57,161
Equity
Share capital		$	44,112	$	43,973
Contributed surplus			14,871		13,176
Retained earnings			11,480		12,968
Accumulated other comprehensive income (loss)			15		(1,434)
Total equity attributable to the owners of the Company			70,478		68,683
Total liabilities and equity		$	126,124	$	125,844

Condensed Interim Consolidated Statements of Income and Comprehensive Income  For the three and nine-month periods ended January 31, 2023 and 2022 (Unaudited) (In thousands of Canadian dollars, except per share data)
		Three Months Ended January 31,				Nine Months Ended January 31,
		2023		2022		2023		2022
Revenue:
SaaS		$	9,544	$	7,003	$	26,343	$	19,221
Maintenance and Support			8,356		8,164		24,722		24,690
Professional Services			13,569		12,942		40,739		39,144
License			1,073		915		2,587		2,248
Hardware			6,375		6,387		16,841		17,609
Total revenue			38,917		35,411		111,232		102,912
Cost of revenue			21,909		20,178		62,787		57,732
Gross profit			17,008		15,233		48,445		45,180
Operating expenses:
Sales and marketing			7,349		6,202		20,302		17,906
General and administration			2,813		2,553		8,619		8,213
Research and development, net of tax credits			5,806		5,128		17,346		14,996
Total operating expenses			15,968		13,883		46,267		41,115
Profit from operations			1,040		1,350		2,178		4,065
Net finance (income) costs			(303)		(127)		(334)		116
Profit before income taxes			1,343		1,477		2,512		3,949
Income tax expense			455		537		869		2,057
Net profit		$	888	$	940	$	1,643	$	1,892
Other comprehensive income (loss):
Effective portion of changes in fair value on designated revenue hedges			2,368		(516)		515		(641)
Exchange differences on translation of foreign operations			742		(107)		934		(592)
Comprehensive income		$	3,998	$	317	$	3,092	$	659
Basic and diluted earnings per common share		$	0.06	$	0.06	$	0.11	$	0.13

Condensed Interim Consolidated Statements of Cash Flows For the three and nine-month periods ended January 31, 2023 and 2022 (Unaudited) (In thousands of Canadian dollars)
		Three Months Ended January 31,					Nine Months Ended January 31,
			2023		2022			2023		2022
Cash flows from operating activities:
Net profit		$	888	$		940	$	1,643	$	1,892
Adjustments for:
Depreciation of property and equipment and right-of-use-assets			476			551		1,335		1,647
Amortization of deferred development costs			135			80		351		203
Amortization of other intangible assets			411			408		1,201		1,230
Interest expense (income) and foreign exchange (gain) loss			(303)			(127)		(334)		116
Unrealized foreign exchange and other			(273)			292		418		1,220
Non-refundable tax credits			(806)			(608)		(1,666)		(1,340)
Stock-based compensation			538			421		1,722		1,344
Income taxes			100			484		430		1,857
Net cash from operating activities excluding changes in non-cash working capital items related to operations			1,166			2,441		5,100		8,169
Accounts receivable			(2,480)			(1,920)		(6,870)		(4,635)
Work in progress			(288)			606		(359)		(1,216)
Other receivables			9			67		(221)		139
Tax credits			(1,224)			(809)		(3,353)		(2,630)
Inventory			(351)			(263)		(494)		(328)
Prepaid expenses			(1,291)			(924)		(1,473)		(1,832)
Contract acquisition costs			(388)			(12)		(718)		(110)
Accounts payable and accrued liabilities			1,283			2,269		1,202		(2,414)
Deferred revenue			(1,198)			(593)		4,455		1,348
Changes in non-cash working capital items related to operations			(5,928)			(1,579)		(7,831)		(11,678)
Net cash (used in) provided by operating activities			(4,762)			862		(2,731)		(3,509)
Cash flows from financing activities:
Repayment of long-term debt			(7,800)			(300)		(8,400)		(916)
Transfers from short-term investments			5,000			-		5,000		-
Payment of lease obligations			(148)			(179)		(570)		(634)
Payment of dividends			(1,093)			(1,018)		(3,131)		(2,907)
Refund of acquired tax liability			-			299		-		299
Interest paid			(92)			(138)		(389)		(444)
Issuance of common shares on exercise of stock options			15			-		112		1,020
Net cash used in financing activities			(4,118)			(1,336)		(7,378)		(3,582)
Cash flows from investing activities:
Interest received			221			38		475		118
Payments related to prior business acquisitions			-			(500)		-		(500)
Acquisitions of property and equipment			(279)			(85)		(510)		(619)
Acquisitions of other intangible assets			(62)			(7)		(62)		(29)
Deferred development costs			(130)			(229)		(597)		(910)
Net cash used in investing activities			(250)			(783)		(694)		(1,940)
Net decrease in cash and cash equivalents during the period			(9,130)			(1,257)		(10,803)		(9,031)
Cash and cash equivalents - beginning of period			21,331			17,978		23,004		25,752
Cash and cash equivalents - end of period		$	12,201	$		16,721	$	12,201	$	16,721

Condensed Interim Consolidated Statements of Changes in Equity For the nine-month periods ended January 31, 2023 and 2022 (Unaudited) (In thousands of Canadian dollars, except number of shares)
	Share capital				Contributed surplus		Accumulated other comprehensive income (loss)		Retained earnings		Total
	Number		Amount
Balance, May 1, 2022	14,562,895	$	43,973	$		13,176	$	(1,434)	$	12,968	$	68,683
Net profit	-		-			-		-		1,643		1,643
Other comprehensive income:
Effective portion of changes in fair value on designated revenue hedges	-		-			-		515		-		515
Exchange difference on translation of foreign operations	-		-			-		934		-		934
Total comprehensive income	-		-			-		1,449		1,643		3,092
Stock-based Compensation	-		-			1,722		-		-		1,722
Dividends to equity owners	-		-			-		-		(3,131)		(3,131)
Share options exercised	7,054		139			(27)		-		-		112
Total transactions with owners of the Company	7,054		139			1,695		-		(3,131)		(1,297)
Balance, January 31, 2023	14,569,949	$	44,112	$		14,871	$	15	$	11,480	$	70,478
Balance, May 1, 2021	14,505,095	$	42,700	$		11,745	$	226	$	12,419	$	67,090
Net profit	-		-			-		-		1,892		1,892
Other comprehensive income:	-		-			-		-		-
Effective portion of changes in fair value on designated revenue hedges	-		-			-		(641)		-		(641)
Exchange difference on translation of foreign operations	-		-			-		(592)		-		(592)
Total comprehensive (loss) income	-		-			-		(1,233)		1,892		659
Stock-based Compensation	-		-			1,344		-		-		1,344
Dividends to equity owners	-		-			-		-		(2,907)		(2,907)
Share options exercised	57,800		1,273			(253)		-		-		1,020
Total transactions with owners of the Company	57,800	$	1,273	$		1,091	$	-		(2,907)	$	(543)
Balance, January 31, 2022	14,562,895	$	43,973	$		12,836	$	(1,007)	$	11,404	$	67,206

SOURCE Tecsys Inc.

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