Tecsys Reports Record Revenue for the Third Quarter of Fiscal 2024

SaaS Revenue soars 48% in the third quarter, SaaS RPO reaches $157 million

MONTREAL, Feb. 29, 2024 /CNW/ -- Tecsys Inc. (TSX: TCS), an industry-leading supply chain management SaaS company, today announced its results for the third quarter fiscal year 2024, ended January 31, 2024. All dollar amounts are expressed in Canadian currency and are prepared in accordance with International Financial Reporting Standards (IFRS).

"Our third quarter represents another record quarter led by SaaS revenue and included the addition of five new logos, three new hospital networks, ongoing customer SaaS migrations, and the biggest bookings quarter of the fiscal year so far," said Peter Brereton, president and CEO of Tecsys. "Our SaaS margins continue to expand and the resulting impact on our overall margin profile is becoming evident. We are seeing activity across all key verticals and through all commercial channels, with rising demand and pipeline expansion. This solid financial performance is bolstered by a market that is showing no signs of slowing down."

Mark Bentler, chief financial officer of Tecsys, added, "After our third quarter we embarked on a strategic restructuring designed to improve profitability over the long term. As part of this effort, we reduced our workforce by about 4% across a range of departments. This restructuring is expected to result in one-time costs of around $2.3 million, which will be recorded in our Q4 fiscal 2024 financial statements and result in anticipated annual operating cost savings of around $4.6 million heading into fiscal 2025."

Third Quarter Highlights:

• SaaS revenue increased by 48% to $14.2 million, up from $9.5 million in Q3 2023.
• SaaS subscription bookingsⁱ (measured on an ARRⁱ basis) decreased by 17% to $4.9 million, compared to $5.8 million in the third quarter of fiscal 2023.
• SaaS Remaining Performance Obligation (RPOⁱ) increased by 23% to $157.2 million at January 31, 2024, up from $128.3 million at the same time last year.
• Annual Recurring Revenue (ARRⁱ) at January 31, 2024, was up 16% to $87.2 million compared to $75.4 million at January 31, 2023.
• Professional services revenue was down by 4% to $13.0 million compared to $13.6 million in Q3 fiscal 2023.
• Total revenue excluding hardware revenue was $36.2 million, 11% higher than $32.5 million reported for Q3 last year, while total revenue rose 13% to reach a record $43.8 million.
• Gross margin was 45%, compared to 44% for the same period of fiscal 2023.
• Total gross profit increased to $19.9 million, up 17% from $17.0 million in Q3 fiscal 2023.
• Operating expenses increased to $18.7 million, higher by $2.7 million or 17% compared to $16.0 million in Q3 last year.
• Profit from operations was $1.2 million, up from $1.0 million in the same period of fiscal 2023.
• Net profit was $0.8 million or $0.05 per share on a fully diluted basis in Q3 fiscal 2024, compared to net profit of $0.9 million or $0.06 per share for the same period in fiscal 2023.
• Adjusted EBITDAⁱⁱ was $2.6 million compared to $2.8 million reported in Q3 last year.
• In the third quarter of fiscal 2024, Tecsys acquired 50,400 of its outstanding common shares for $1.5 million as part of its ongoing normal course issuer bid. 

Year-to-date performance for first nine months of Fiscal 2024:

• SaaS revenue increased by 43% to $37.7 million, up from $26.3 million in the same period of fiscal 2023.
• SaaS subscription bookingsⁱ (measured on an ARRⁱ basis) decreased by 16% to $10.5 million, compared to $12.5 million in the same period of fiscal 2023.
• Professional services revenue was $40.8 million compared to $40.7 million in the same period of fiscal 2023.
• Total revenue excluding hardware revenue was $105.4 million, 12% higher than $94.4 million reported for the same period of fiscal 2023, while total revenue rose 14% to reach $127.3 million.
• Gross margin was 45% for the first nine months of fiscal 2024 compared to 44% for the same period in fiscal 2023.
• Total gross profit increased to $57.8 million, up 19% from $48.4 million in the same period of fiscal 2023.
• Operating expenses increased to $55.2 million, higher by $8.9 million or 19% compared to $46.3 million in the same period of fiscal 2023.
• Profit from operations was $2.6 million, up from $2.2 million in the same period of fiscal 2023.
• Net profit was $1.6 million or $0.11 per fully diluted share, flat compared to the same period in fiscal 2023.
• Adjusted EBITDAⁱⁱ was $6.8 million compared to $7.0 million reported in the same period of fiscal 2023.

"Based on our Q3 results and our Q4 outlook, we are revising our full year fiscal 2024 guidance to tighten the range on total revenue growth, tighten the range and increase the high end on SaaS revenue growth and tighten the range on short-term Adjusted EBITDA margin guidance," continued Bentler. "We expect to provide updated guidance for fiscal 2025 as part of our Q4 and full year fiscal 2024 earnings release."

Financial Guidance:

Tecsys is revising financial guidance as follows:

	Current FY24 Guidance	Previous FY24 Guidance	Reiterate FY25 Guidance
Total Revenue Growth	11-14%	10-15%	n.a.
SaaS Revenue Growth	37-38%	35-37%	n.a.
Adjusted EBITDA^ii Margin	5-6%	4-6%	8-9%

On February 29, 2024, the Company declared a quarterly dividend of $0.08 per share to be paid on April 11, 2024, to shareholders of record on March 21, 2024.

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 2024 Financial Statements.

ⁱⁱ See Non-IFRS Performance Measures in Management's Discussion and Analysis of the Q3 2024 Financial Statements.

Third Quarter Fiscal 2024 Results Conference Call
Date: March 1, 2024
Time: 8:30am EST
Phone number: 800-935-9319 or 416-981-9016
The call can be replayed until March 8, 2024, by calling:
800-558-5253 or 416-626-4100 (access code: 22029167)

About Tecsys

Since our founding 40 years ago, much has changed in the realm of supply chain technology. But one thing has remained constant; by developing dynamic and innovative supply chain solutions, Tecsys has been equipping organizations for growth and competitive advantage. Serving healthcare, distribution and converging commerce industries, and spanning multiple complex, regulated and high-volume markets, Tecsys delivers warehouse management, distribution and transportation management, supply management at point of use, and retail order management, as well as complete 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.sedarplus.ca).

Copyright © Tecsys Inc. 2024. 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)		2024		2023		2024		2023		2024		2023
Net profit for the period	$	759	$	888	$	1,590	$	1,643	$	2,036	$	4,229
Adjustments for:
Depreciation of property and equipment and right-of-use assets		355		476		1,116		1,335		1,556		1,850
Amortization of deferred development costs		147		135		436		351		581		438
Amortization of other intangible assets		356		411		1,146		1,201		1,548		1,583
Interest expense		45		92		136		389		153		567
Interest income		(260)		(221)		(782)		(475)		(993)		(532)
Income taxes		644		455		1,422		869		2,177		(242)
EBITDA	$	2,046	$	2,236	$	5,064	$	5,313	$	7,058	$	7,893
Adjustments for:
Stock based compensation		594		538		1,770		1,722		2,225		2,062
Gain on remeasurement of lease liability		-		-		-		-		-		(573)
Recognition of tax credits generated in prior periods		-		-		-		-		-		(617)
Adjusted EBITDA^ii	$	2,640	$	2,774	$	6,834	$	7,035	$	9,283	$	8,765

Condensed Interim Consolidated Statements of Financial Position As at January 31, 2024 and April 30, 2023 (Unaudited) (In thousands of Canadian dollars)
		January 31, 2024		April 30, 2023
Assets
Current assets
Cash and cash equivalents		$	16,724	$	21,235
Short-term investments			16,486		15,835
Accounts receivable			24,772		22,900
Work in progress			3,389		1,734
Other receivables			530		523
Tax credits			5,330		5,338
Inventory			1,903		1,034
Prepaid expenses			9,270		8,193
Total current assets			78,404		76,792
Non-current assets
Other long-term receivables			901		363
Tax credits			5,900		5,368
Property and equipment			1,483		1,802
Right-of-use assets			1,352		1,708
Contract acquisition costs			3,864		3,738
Deferred development costs			2,627		2,254
Other intangible assets			7,996		9,287
Goodwill			17,294		17,467
Deferred tax assets			8,134		8,137
Total non-current assets			49,551		50,124
Total assets		$	127,955	$	126,916
Liabilities
Current liabilities
Accounts payable and accrued liabilities		$	21,772	$	21,669
Deferred revenue			30,697		30,388
Lease obligations			798		793
Total current liabilities			53,267		52,850
Non-current liabilities
Other long-term accrued liabilities			8		253
Deferred tax liabilities			1,222		1,255
Lease obligations			1,506		2,120
Total non-current liabilities			2,736		3,628
Total liabilities		$	56,003	$	56,478
Equity
Share capital		$	48,026	$	44,338
Contributed surplus			14,229		15,285
Retained earnings			9,037		10,832
Accumulated other comprehensive income (loss)			660		(17)
Total equity attributable to the owners of the Company			71,952		70,438
Total liabilities and equity		$	127,955	$	126,916

Condensed Interim Consolidated Statements of Income and Comprehensive Income For the three and nine-month periods ended January 31, 2024 and 2023 (Unaudited) (In thousands of Canadian dollars, except per share data)
		Three Months Ended January 31,				Nine Months Ended January 31,
			2024		2023		2024		2023
Revenue:
SaaS		$	14,160	$	9,544	$	37,727	$	26,343
Maintenance and Support			8,620		8,356		25,817		24,722
Professional Services			13,021		13,569		40,798		40,739
License			396		1,073		1,104		2,587
Hardware			7,626		6,375		21,841		16,841
Total revenue			43,823		38,917		127,287		111,232
Cost of revenue			23,893		21,909		69,512		62,787
Gross profit			19,930		17,008		57,775		48,445
Operating expenses:
Sales and marketing			8,223		7,349		24,539		20,302
General and administration			2,650		2,813		8,580		8,619
Research and development, net of tax credits			7,834		5,806		22,079		17,346
Total operating expenses			18,707		15,968		55,198		46,267
Profit from operations			1,223		1,040		2,577		2,178
Other income			(180)		(303)		(435)		(334)
Profit before income taxes			1,403		1,343		3,012		2,512
Income tax expense			644		455		1,422		869
Net profit		$	759	$	888	$	1,590	$	1,643
Other comprehensive income (loss):
Effective portion of changes in fair value on designated revenue hedges			4,101		2,368		1,101		515
Exchange differences on translation of foreign operations			(90)		742		(424)		934
Comprehensive Income		$	4,770	$	3,998	$	2,267	$	3,092
Basic and diluted earnings per common share		$	0.05	$	0.06	$	0.11	$	0.11

Condensed Interim Consolidated Statements of Cash Flows For the three and nine-month periods ended January 31, 2024 and 2023 (Unaudited) (In thousands of Canadian dollars)
		Three Months Ended January 31,				Nine Months Ended January 31,
			2024		2023		2024		2023
Cash flows from operating activities:
Net profit		$	759	$	888	$	1,590	$	1,643
Adjustments for:
Depreciation of property and equipment and right-of-use-assets			355		476		1,116		1,335
Amortization of deferred development costs			147		135		436		351
Amortization of other intangible assets			356		411		1,146		1,201
Interest expense (income) and foreign exchange (gain) loss			(180)		(303)		(435)		(334)
Unrealized foreign exchange and other			(452)		(273)		(1,050)		418
Non-refundable tax credits			(151)		(806)		(1,365)		(1,666)
Stock-based compensation			594		538		1,770		1,722
Income taxes			78		100		454		430
Net cash from operating activities excluding changes in non-cash working capital items related to operations			1,506		1,166		3,662		5,100
Accounts receivable			(4,175)		(2,480)		(1,950)		(6,870)
Work in progress			557		(288)		(1,662)		(359)
Other receivables			184		9		136		(221)
Tax credits			3,160		(1,224)		841		(3,353)
Inventory			213		(351)		(871)		(494)
Prepaid expenses			(304)		(1,291)		(945)		(1,473)
Contract acquisition costs			(401)		(388)		(261)		(718)
Accounts payable and accrued liabilities			3,890		1,478		597		1,614
Deferred revenue			(2,295)		(1,198)		327		4,455
Changes in non-cash working capital items related to operations			829		(5,733)		(3,788)		(7,419)
Net cash provided by (used in) operating activities			2,335		(4,567)		(126)		(2,319)
Cash flows from financing activities:
Repayment of long-term debt			-		(7,800)		-		(8,400)
Transfers from short-term investments			-		5,000		-		5,000
Payment of lease obligations			(195)		(148)		(593)		(570)
Payment of dividends			(1,177)		(1,093)		(3,385)		(3,131)
Interest paid			(45)		(92)		(136)		(389)
Issuance of common shares on exercise of stock options			423		15		3,067		112
Shares repurchased and cancelled			(1,532)		-		(2,205)		-
Net cash used in financing activities			(2,526)		(4,118)		(3,252)		(7,378)
Cash flows from investing activities:
Interest received			22		26		91		63
Transfers from short-term investments			18		-		40		-
Acquisitions of property and equipment			(190)		(279)		(455)		(510)
Acquisitions of other intangible assets			-		(62)		-		(62)
Deferred development costs			(309)		(130)		(809)		(597)
Net cash used in investing activities			(459)		(445)		(1,133)		(1,106)
Net decrease in cash and cash equivalents during the period			(650)		(9,130)		(4,511)		(10,803)
Cash and cash equivalents - beginning of period			17,374		21,331		21,235		23,004
Cash and cash equivalents - end of period		$	16,724	$	12,201	$	16,724	$	12,201

Condensed Interim Consolidated Statements of Changes in Equity For the three and nine-month periods ended January 31, 2024 and 2023 (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, 2023		14,582,837	$	44,338	$	15,285	$	(17)	$	10,832	$	70,438
Net profit		-		-		-		-		1,590		1,590
Other comprehensive income:
Effective portion of changes in fair value on designated revenue hedges		-		-		-		1,101		-		1,101
Exchange difference on translation of foreign operations		-		-		-		(424)		-		(424)
Total comprehensive income		-		-		-		677		1,590		2,267
Shares repurchased and cancelled		(76,200)		(248)		(1,957)		-		-		(2,205)
Stock-based Compensation		-		-		1,770		-		-		1,770
Dividends to equity owners		-		-		-		-		(3,385)		(3,385)
Share options exercised		192,302		3,936		(869)		-		-		3,067
Total transactions with owners of the Company		116,102		3,688		(1,056)		-		(3,385)		(753)
Balance, January 31, 2024		14,698,939	$	48,026	$	14,229	$	660	$	9,037	$	71,952
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

SOURCE Tecsys Inc.

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