Tecsys Reports Financial Results for the Second Quarter of Fiscal 2023

Revenue sets new record while SaaS revenue up 34% year-over-year

MONTREAL, Nov. 30, 2022 /PRNewswire/ -- Tecsys Inc. (TSX: TCS), an industry-leading supply chain management SaaS company, today announced its results for the second quarter of fiscal year 2023, ended October 31, 2022. All dollar amounts are expressed in Canadian currency and are prepared in accordance with International Financial Reporting Standards (IFRS).

Second Quarter Highlights:

SaaS revenue increased by 34% to $8.8 million, up from $6.6 million in Q2 2022.
SaaS subscription bookingsⁱ (measured on an ARRⁱ basis) decreased by 31% to $2.8 million, compared to $4.0 million in the second quarter of 2022.
SaaS Remaining Performance Obligation (RPOⁱ) increased by 51% to $109.5 million at October 31, 2022, up from $72.7 million at the same time last year.
Annual Recurring Revenue (ARRⁱ) at October 31, 2022 was up 25% to $71.2 million compared to $56.9 million at October 31, 2021.
Professional services revenue was up 4% to $13.5 million compared to $13.1 million in Q2 last year.
Total revenue excluding hardware revenue was $31.5 million, 9% higher than $28.8 million reported for Q2 last year, while total revenue reached a record $38.1 million.
Gross margin was 44% compared to 45% in the same period in fiscal 2022.
Total gross profit increased to $16.7 million, up 7% from $15.5 million in Q2 last year.
Operating expenses increased to $15.6 million, higher by $1.7 million or 13% compared to $13.9 million in Q2 last year.
Profit from operations was $1 million, down from $1.6 million in Q2 last year.
Net profit was $0.7 million or $0.05 per share on a fully diluted basis for both Q2 2023 and Q2 2022.
Adjusted EBITDAⁱⁱ was $2.8 million, down 13% compared to $3.2 million reported in Q2 last year.

"We continue to see great traction across our vertical markets in the quarter with seven new logo wins as well as solid base account activity including another hospital network migration. Among the new logo wins, we added two new hospital networks, as well as North American and international logos in our converging complex distribution market." said Peter Brereton, president and CEO of Tecsys, Inc. "In spite of challenging general economic conditions in the near term, we continue to see robust pipeline activity and strong demand. In light of this opportunity, we continue to invest to drive organic growth."

Mark Bentler, chief financial officer of Tecsys Inc., added, "We are pleased with our Q2 performance, a record revenue quarter led by 34% SaaS revenue growth. We also crossed an important milestone this quarter in that our SaaS revenue now represents more than 50% of all our recurring revenue, and we are seeing the momentum continue with year-to-date SaaS bookings up by 30%."


	Three months ended				Six months ended					Trailing 12 months ended
*Results from operations*		October 31, 2022		October 31, 2021			October 31, 2022		October 31, 2021			October 31, 2022		October 31, 2021

Total Revenue	$	38,111	$	34,269		$	72,315	$	67,501		$	142,014	$	131,817
Total Revenue Excluding Hardware		31,490		28,823			61,849		56,279			120,043		110,178
SaaS Revenue, Maintenance and Support Revenue		16,896		14,765			33,165		28,744			64,048		55,938
Professional Services Revenue		13,539		13,076			27,170		26,202			53,008		50,691
Gross Profit		16,679		15,518			31,437		29,947			61,800		61,077
Gross Margin %		44 %		45 %			43 %		44 %			44 %		46 %
Operating Expenses		15,631		13,891			30,299		27,232			58,001		53,101
Op. Ex. As % of Revenue		41 %		41 %			42 %		40 %			41 %		40 %
Profit from Operations		1,048		1,627			1,138		2,715			3,799		7,976
Adjusted EBITDAⁱⁱ		2,777		3,206			4,261		5,662			8,729		13,543
EPS basic	$	0.05	$	0.05		$	0.05	$	0.07		$	0.29	$	0.34
EPS diluted	$	0.05	$	0.05		$	0.05	$	0.06		$	0.28	$	0.34

License Booking		1,006		1,061			1,255		1,347			2,310		3,270
SaaS ARR Bookings		2,796		4,050			6,704		5,149			13,476		9,635

Annual Recurring Revenue												71,198		56,939
SaaS RPO												109,534		72,673
Professional Services Backlog												31,869		33,124

Year-to-date performance for first half of fiscal 2023:

SaaS revenue increased by 37% to $16.8 million, up from $12.2 million the same period of fiscal 2022.
SaaS subscription bookingsⁱ (measured on an ARRⁱ basis) increased to $6.7 million, 30% higher from $5.1 million in the same period of fiscal 2022.
Professional services revenue was up 4% to $27.2 million compared to $26.2 million in the same period of fiscal 2022.
Total revenue excluding hardware revenue was $61.8 million, 10% higher than $56.3 million reported for the same period of fiscal 2022.
Gross margin was 43% compared to 44% in the same period of fiscal 2022.
Total gross profit increased to $31.4 million, up 5% from $29.9 million in the same period of fiscal 2022.
Operating expenses increased to $30.3 million, higher by $3.1 million or 11% compared to $27.2 million in the same period of fiscal 2022.
Profit from operations was $1.1 million, down from $2.7 million in the same period of fiscal 2022.
Net profit was $755 thousand or $0.05 per share on a fully diluted basis in the first half of fiscal 2022 compared to a net profit of $952 thousand or $0.06 per share on a fully diluted basis for the same period in fiscal 2022.
Adjusted EBITDAⁱⁱ was $4.3 million, down 25% compared to $5.7 million reported in the same period in fiscal 2022.

On November 30, 2022, the Company declared a quarterly dividend of $0.075 per share, increasing the quarterly dividend from $0.07 per share. The dividend is to be paid on January 6, 2023 to shareholders of record on December 15, 2022.

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 Q2 2023 Financial Statements.
ⁱⁱ See Non-IFRS Performance Measures in Management's Discussion and Analysis of the Q2 2023 Financial Statements.

Second Quarter Fiscal 2023 Results Conference Call
Date: December 1, 2022
Time: 8:30am EDT
Phone number: (877) 521-4127 or (416) 641-6662
The call can be replayed until December 8, 2022 by calling:
(800) 558-5253 or (416) 626-4100 (access code: 22022988)

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).

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 October 31,				Six months ended October 31,				Trailing 12 months ended October 31,
(in thousands of CAD)		2022		2021		2022		2021		2022		2021

Profit for the period	$	715	$	708	$	755	$	952	$	4,281	$	4,819
Adjustments for:
Depreciation of property and equipment and right-of-use assets		429		553		859		1,096		1,925		2,217
Amortization of deferred development costs		114		69		216		123		383		231
Amortization of other intangible assets		394		411		790		822		1,580		1,651
Interest expense		178		145		297		306		613		622
Interest income		(150)		(40)		(254)		(80)		(648)		(141)
Income taxes		389		791		414		1,520		(160)		2,719
EBITDA	$	2,069	$	2,637	$	3,077	$	4,739	$	7,974	$	12,118
Adjustments for:
Stock based compensation		708		569		1,184		923		1,945		1,425
Gain on remeasurement of lease liability		-		-		-		-		(573)		-
Recognition of tax credits generated in prior periods		-		-		-		-		(617)		-
Adjusted EBITDAⁱⁱ	$	2,777	$	3,206	$	4,261	$	5,662	$	8,729	$	13,543

Condensed Interim Consolidated Statements of Financial Position As at October 31, 2022 and April 30, 2022 (Unaudited) (In thousands of Canadian dollars)

	Note	October 31, 2022		April 30, 2022
Assets
Current assets
Cash and cash equivalents		$	21,331	$	23,004
Short-term investments	3		20,456		20,239
Accounts receivable			21,370		16,962
Work in progress			1,651		1,579
Other receivables			718		234
Tax credits			7,912		5,224
Inventory			949		806
Prepaid expenses			6,574		6,392
Total current assets			80,961		74,440
Non-current assets
Other long-term receivables			179		192
Tax credits			4,083		3,782
Property and equipment			1,775		2,064
Right-of-use assets	4		4,421		4,547
Contract acquisition costs	5		3,507		3,177
Deferred development costs			2,121		1,870
Other intangible assets			9,502		10,301
Goodwill			16,856		16,863
Deferred tax assets			8,613		8,608
Total non-current assets			51,057		51,404
Total assets		$	132,018	$	125,844
Liabilities
Current liabilities
Accounts payable and accrued liabilities		$	19,963	$	16,971
Deferred revenue			30,343		24,689
Current portion of long-term debt	6		1,200		1,200
Lease obligations	7		660		662
Total current liabilities			52,166		43,522
Non-current liabilities
Long-term debt	6		6,600		7,200
Deferred tax liabilities			1,257		1,258
Lease obligations	7		4,975		5,181
Total non-current liabilities			12,832		13,639
Total liabilities		$	64,998	$	57,161
Equity
Share capital	8	$	44,094	$	43,973
Contributed surplus			14,336		13,176
Retained earnings			11,685		12,968
Accumulated other comprehensive loss	12		(3,095)		(1,434)
Total equity attributable to the owners of the Company			67,020		68,683
Total liabilities and equity		$	132,018	$	125,844

Condensed Interim Consolidated Statements of Income and Comprehensive Income For the three and six-month periods ended October 31, 2022 and 2021 (Unaudited) (In thousands of Canadian dollars, except per share data)

		Three Months Ended October 31,				Six Months Ended October 31,
	Note	2022		2021		2022		2021
Revenue:
SaaS		$	8,798	$	6,565	$	16,799	$	12,218
Maintenance and Support			8,098		8,200		16,366		16,526
Professional Services			13,539		13,076		27,170		26,202
License			1,055		982		1,514		1,333
Hardware			6,621		5,446		10,466		11,222
Total revenue			38,111		34,269		72,315		67,501
Cost of revenue	10		21,432		18,751		40,878		37,554
Gross profit			16,679		15,518		31,437		29,947
Operating expenses:
Sales and marketing			6,703		6,022		12,953		11,704
General and administration			3,072		2,801		5,806		5,660
Research and development, net of tax credits			5,856		5,068		11,540		9,868
Total operating expenses			15,631		13,891		30,299		27,232
Profit from operations			1,048		1,627		1,138		2,715
Net finance (income) costs	11		(56)		128		(31)		243
Profit before income taxes			1,104		1,499		1,169		2,472
Income tax expense			389		791		414		1,520
Net profit, attributable to the owners of the Company		$	715	$	708	$	755	$	952
Other comprehensive (loss) income:
Effective portion of changes in fair value on designated revenue hedges	12		(2,007)		233		(1,853)		(125)
Exchange differences on translation of foreign operations	12		496		(452)		192		(485)
Comprehensive (loss) profit, attributable to the owners of the Company		$	(796)	$	489	$	(906)	$	342
Basic earnings per common share	8	$	0.05	$	0.05	$	0.05	$	0.07
Diluted earnings per common share	8	$	0.05	$	0.05	$	0.05	$	0.06

Condensed Interim Consolidated Statements of Cash Flows For the three and six-month periods ended October 31, 2022 and 2021 (Unaudited) (In thousands of Canadian dollars)

		Three Months Ended October 31,					Six Months Ended October 31,
	Note		2022		2021			2022		2021
Cash flows from operating activities:
Net profit		$	715	$		708	$	755	$	952
Adjustments for:
Depreciation of property and equipment and right-of-use-assets			429			553		859		1,096
Amortization of deferred development costs			114			69		216		123
Amortization of other intangible assets			394			411		790		822
Interest expense (income) and foreign exchange (gain) loss	11		(56)			128		(31)		243
Unrealized foreign exchange and other			1,063			(333)		691		928
Non-refundable tax credits			(439)			(366)		(860)		(732)
Stock-based compensation	8		708			569		1,184		923
Income taxes			305			680		330		1,373
Net cash from operating activities excluding changes in non-cash working capital items related to operations			3,233			2,419		3,934		5,728
Accounts receivable			(3,847)			(223)		(4,390)		(2,715)
Work in progress			883			(1,275)		(71)		(1,822)
Other receivables			105			106		(230)		72
Tax credits			(1,081)			(911)		(2,129)		(1,821)
Inventory			112			(53)		(143)		(65)
Prepaid expenses			380			(443)		(182)		(908)
Contract acquisition costs			(77)			(226)		(330)		(98)
Accounts payable and accrued liabilities			2,931			(750)		(81)		(4,683)
Deferred revenue			4,415			2,000		5,653		1,941
Changes in non-cash working capital items related to operations			3,821			(1,775)		(1,903)		(10,099)
Net cash provided by (used in) operating activities			7,054			644		2,031		(4,371)
Cash flows from financing activities:
Repayment of long-term debt			(300)			(304)		(600)		(616)
Payment of lease obligations	7		(178)			(224)		(422)		(455)
Payment of dividends			(2,038)			(1,889)		(2,038)		(1,889)
Interest paid			(178)			(145)		(297)		(306)
Issuance of common shares on exercise of stock options			35			1,020		97		1,020
Net cash used in financing activities			(2,659)			(1,542)		(3,260)		(2,246)
Cash flows from investing activities:
Interest received	11		150			40		254		80
Acquisitions of property and equipment			(171)			(304)		(231)		(534)
Acquisitions of other intangible assets			-			(7)		-		(22)
Deferred development costs			(258)			(195)		(467)		(681)
Net cash used in investing activities			(279)			(466)		(444)		(1,157)
Net increase (decrease) in cash and cash equivalents during the period			4,116			(1,364)		(1,673)		(7,774)
Cash and cash equivalents - beginning of period			17,215			19,342		23,004		25,752
Cash and cash equivalents - end of period		$	21,331	$		17,978	$	21,331	$	17,978

Condensed Interim Consolidated Statements of Changes in Equity For the six-month periods ended October 31, 2022 and 2021 (Unaudited) (In thousands of Canadian dollars, except number of shares)
		Share capital				Contributed surplus		Accumulated other comprehensive loss		Retained earnings		Total
	Note	Number		Amount
Balance, May 1, 2022		14,562,895	$	43,973	$		13,176	$	(1,434)	$	12,968	$	68,683
Net profit		-		-			-		-		755		755
Other comprehensive income:
Effective portion of changes in fair value on designated revenue hedges	12	-		-			-		(1,853)		-		(1,853)
Exchange difference on translation of foreign operations		-		-			-		192		-		192
Total comprehensive loss income		-		-			-		(1,661)		755		(906)
Stock-based Compensation	8	-		-			1,184		-		-		1,184
Dividends to equity owners	8	-		-			-		-		(2,038)		(2,038)
Share options exercised	8	5,999		121			(24)		-		-		97
Total transactions with owners of the Company		5,999		121			1,160		-		(2,038)		(757)
Balance, October 31, 2022		14,568,894	$	44,094	$		14,336	$	(3,095)	$	11,685	$	67,020

Balance, May 1, 2021		14,505,095	$	42,700	$		11,745	$	226	$	12,419	$	67,090
Net profit		-		-			-		-		952		952
Other comprehensive income:		-		-			-		-		-
Effective portion of changes in fair value on designated revenue hedges		-		-			-		(125)		-		(125)
Exchange difference on translation of foreign operations		-		-			-		(485)		-		(485)
Total comprehensive income		-		-			-		(610)		952		342
Stock-based Compensation	8	-		-			923		-		-		923
Dividends to equity owners		-		-			-		-		(1,889)		(1,889)
Share options exercised	8	57,800		1,273			(253)		-		-		1,020
Total transactions with owners of the Company		57,800	$	1,273	$		670	$	-		(1,889)	$	54
Balance, October 31, 2021		14,562,895	$	43,973	$		12,415	$	(384)	$	11,482	$	67,486

SOURCE Tecsys Inc.

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