SaaS Revenue Rises 37% in the Second Quarter,  SaaS RPO reaches $147 million

MONTREAL, Nov. 30, 2023 /PRNewswire/ -- Tecsys Inc. (TSX: TCS), an industry-leading supply chain management SaaS company, today announced its results for the second quarter fiscal year 2024, ended October 31, 2023. All dollar amounts are expressed in Canadian currency and are prepared in accordance with International Financial Reporting Standards (IFRS). TECSYS (PRNewsfoto/TECSYS)

"We have made notable progress this quarter, with a 37% increase in SaaS revenue," said Peter Brereton, president and CEO of Tecsys. "Our activities in the quarter have strengthened our market position, bolstered our customer and partner communities, and reaffirmed our commitment to innovation. We are seeing strong pipeline expansion and activity across verticals. Notably, there is accelerated demand for our pharmacy supply chain solutions, where we have multiple new customer proof points in the face of Drug Supply Chain Security Act regulation enforcement. On top of that, our user conference in Scottsdale in the month of September was excellent, with attendance up 40% and a massive increase in average customer size."

Mark Bentler, chief financial officer of Tecsys adds, "We continue to see positive momentum with SaaS RPO up 34%, our SaaS margins continuing to expand and our partner driven pipeline up 98% from the same time last year."

Second Quarter Highlights:

SaaS revenue increased by 37% to $12.1 million, up from $8.8 million in Q2 2023. SaaS subscription bookingsi (measured on an ARRi basis) increased by 34% to $3.7 million, compared to $2.8 million in the second quarter of fiscal 2023. SaaS Remaining Performance Obligation (RPOi) increased by 34% to $146.7 million at October 31, 2023, up from $109.5 million at the same time last year. Annual Recurring Revenue (ARRi) at October 31, 2023 was up 19% to $84.9 million compared to $71.2 million at October 31, 2022. Professional services revenue was down by 5% to $12.9 million compared to $13.5 million in Q2 fiscal 2023. Total revenue excluding hardware revenue was $34.1 million, 8% higher than $31.5 million reported for Q2 last year, while total revenue rose 9% to reach $41.5 million. Gross margin was 44%, flat compared to the same period of fiscal 2023.  Total gross profit increased to $18.3 million, up 10% from $16.7 million in Q2 fiscal 2023. Operating expenses increased to $18.7 million, higher by $3.1 million or 20% compared to $15.6 million in Q2 last year. Loss from operations was $0.4 million compared to Profit from operations of $1.0 million in Q2 last year. Net loss was $340 thousand or $0.02 per share on a fully diluted basis in Q2 fiscal 2024, compared to net profit of $0.7 million or $0.05 per share for the same period in fiscal 2023. Adjusted EBITDAii was $1.0 million compared to $2.8 million reported in Q2 last year.



Year-to-date performance for first half of Fiscal 2024:

SaaS revenue increased by 40% to $23.6 million, up from $16.8 million in the same period of fiscal 2023. SaaS subscription bookingsi (measured on an ARRi basis) decreased by 15% to $5.7 million, compared to $6.7 million in the same period of fiscal 2023. Professional services revenue was up 2% to $27.8 million compared to $27.2 million in the same period of fiscal 2023. Total revenue excluding hardware revenue was $69.2 million, 12% higher than $61.8 million reported for the same period of fiscal 2023, while total revenue rose 15% to reach $83.5 million. Gross margin was 45% for the first half of fiscal 2024 compared to 43% for the same period in fiscal 2023. Total gross profit increased to $37.8 million, up 20% from $31.4 million in the same period of fiscal 2023. Operating expenses increased to $36.5 million, higher by $6.2 million or 20% compared to $30.3 million in the same period of fiscal 2023. Profit from operations was $1.4 million, up from $1.1 million in the same period of fiscal 2023. Net profit was $0.8 million or $0.06 per fully diluted share compared to $0.8 million or $0.05 per share on a fully diluted basis for the same period in fiscal 2023. Adjusted EBITDAii was $4.2 million compared to $4.3 million reported in the same period of fiscal 2023.

"Despite a temporary dip in professional services revenue this quarter due to project scheduling and the swift growth of our partner ecosystem, we maintain a strong backlog" added Mark Bentler "We anticipate continued growth in professional services revenue and are adequately staffed to meet these demands.  As a result of that temporary slow down in professional services revenue, we are adjusting our short-term Adjusted EBITDA outlook to provide a range, while affirming our Adjusted EBITDA guidance for Fiscal 2025 and our SaaS and total revenue growth guidance for Fiscal 2024."

Financial Guidance: Tecsys is updating financial guidance as follows: Current Previous Reiterate FY24 Guidance FY24 Guidance FY25 Guidance Total Revenue Growth 10-15% 10-15% n.a. SaaS Revenue Growth 35-37% 35-37% n.a. Adjusted EBITDA1 Margin 4-6% 6 % 8-9%

On November 30, 2023, the Company declared a quarterly dividend of $0.08 per share to be paid on January 5, 2024 to shareholders of record on December 14, 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 Q2 2024 Financial Statements. ii See Non-IFRS Performance Measures in Management's Discussion and Analysis of the Q2 2024 Financial Statements.

Second Quarter Fiscal 2024 Results Conference Call
Date: December 1, 2023
Time: 8:30am EST
Phone number: 877-224-7327 or 416-641-6705
The call can be replayed until December 8, 2023 by calling:
800-558-5253 or 416-626-4144 (access code: 22028536)

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. 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 October 31, Six months

ended October 31, Trailing 12 months

ended October 31, (in thousands of CAD) 2023 2022 2023 2022 2023 2022 Net profit for the period $ (340) $ 715 $ 831 $ 755 $ 2,165 $ 4,281 Adjustments for: Depreciation of property and equipment and right-of-use assets 377 429 761 859 1,677 1,925 Amortization of deferred development costs 147 114 289 216 569 383 Amortization of other intangible assets 394 394 790 790 1,603 1,580 Interest expense 53 178 91 297 200 613 Interest income (253) (150) (522) (254) (954) (648) Income taxes (81) 389 778 414 1,988 (160) EBITDA $ 297 $ 2,069 $ 3,018 $ 3,077 $ 7,248 $ 7,974 Adjustments for: Stock based compensation 724 708 1,176 1,184 2,169 1,945 Gain on remeasurement of lease liability - - - - - (573) Recognition of tax credits generated in prior periods - - - - - (617) Adjusted EBITDAii $ 1,021 $ 2,777 $ 4,194 $ 4,261 $ 9,417 $ 8,729

Consolidated Statements of Financial Position
As at October 31, 2023 and April 30, 2023
(In thousands of Canadian dollars) October 31, 2023 April 30, 2023 Assets Current assets Cash and cash equivalents $ 17,374 $ 21,235 Short-term investments 16,266 15,835 Accounts receivable 20,625 22,900 Work in progress 3,949 1,734 Other receivables 412 523 Taxcredits 8,516 5,338 Inventory 2,117 1,034 Prepaid expenses 8,833 8,193 Total current assets 78,092 76,792 Non-current assets Other long-term receivables 119 363 Taxcredits 5,723 5,368 Property and equipment 1,540 1,802 Right-of-use assets 1,463 1,708 Contract acquisition costs 3,598 3,738 Deferred development costs 2,465 2,254 Other intangible assets 8,393 9,287 Goodwill 17,347 17,467 Deferred tax assets 8,137 8,137 Total non-current assets 48,785 50,124 Total assets $ 126,877 $ 126,916 Liabilities Current liabilities Accounts payable and accrued liabilities $ 19,445 $ 21,669 Deferred revenue 32,999 30,388 Lease obligations 789 793 Total current liabilities 53,233 52,850 Non-current liabilities Other long-term accrued liabilities 1,825 253 Deferred tax liabilities 1,232 1,255 Lease obligations 1,713 2,120 Total non-current liabilities 4,770 3,628 Total liabilities $ 58,003 $ 56,478 Equity Share capital $ 47,642 $ 44,338 Contributed surplus 15,128 15,285 Retained earnings 9,455 10,832 Accumulated other comprehensive income (loss) (3,351) (17) Total equity attributable to the owners of the Company 68,874 70,438 Total liabilities and equity $ 126,877 $ 126,916

Consolidated Statements of Income and Comprehensive Income 
For the three and six-month periods ended October 31, 2023 and 2022
(In thousands of Canadian dollars, except per share data) Three Months Ended

October 31,  Six Months Ended

October 31,  2023 2022 2023 2022 Revenue: SaaS $ 12,072 $ 8,798 $ 23,567 $ 16,799 Maintenance and Support 8,899 8,098 17,197 16,366 Professional Services 12,869 13,539 27,777 27,170 License 252 1,055 708 1,514 Hardware 7,397 6,621 14,215 10,466 Total revenue 41,489 38,111 83,464 72,315 Cost of revenue 23,144 21,432 45,619 40,878 Gross profit 18,345 16,679 37,845 31,437 Operating expenses: Sales and marketing 8,645 6,703 16,316 12,953 General and administration 2,971 3,072 5,930 5,806 Research and development, net of tax credits 7,133 5,856 14,245 11,540 Total operating expenses 18,749 15,631 36,491 30,299 (Loss) profit from operations (404) 1,048 1,354 1,138 Other costs (income)  17 (56) (255) (31) (Loss) profit before income taxes (421) 1,104 1,609 1,169 Income tax (benefit) expense (81) 389 778 414 Net (loss) profit $ (340) $ 715 $ 831 $ 755 $ Other comprehensive income (loss): Effective portion of changes in fair value on designated revenue hedges (5,573) (2,007) (3,000) (1,853) Exchange differences on translation of foreign operations 92 496 (334) 192 Comprehensive loss $ (5,821) $ (796) $ (2,503) $ (906) Basic and diluted (loss) earnings per common share $ (0.02) $ 0.05 $ 0.06 $ 0.05

See accompanying notes to the consolidated financial statements.

Consolidated Statements of Cash Flows 
For the three and six-month periods ended October 31, 2023 and 2022
(In thousands of Canadian dollars) Three Months Ended

October 31,  Six Months Ended

October 31, 2023 2022 2023 2022 Cash flows from operating activities: Net profit $ (340) $ 715 $ 831 $ 755 Adjustments for: Depreciation of property and equipment and right-of-use-assets 377 429 761 859 Amortization of deferred development costs 147 114 289 216 Amortization of other intangible assets 394 394 790 790 Interest expense (income) and foreign exchange (gain) loss 17 (56) (255) (31) Unrealized foreign exchange and other 600 1,063 (598) 691 Non-refundable tax credits (774) (439) (1,214) (860) Stock-based compensation 724 708 1,176 1,184 Income taxes 362 305 376 330 Net cash from operating activities excluding changes in non-cash working capital items related to operations 1,507 3,233 2,156 3,934 Accounts receivable 4,045 (3,847) 2,225 (4,390) Work in progress (1,390) 883 (2,219) (71) Other receivables 214 105 (48) (230) Tax credits (1,248) (1,081) (2,319) (2,129) Inventory (242) 112 (1,084) (143) Prepaid expenses (358) 380 (641) (182) Contract acquisition costs 137 (77) 140 (330) Accounts payable and accrued liabilities 273 3,056 (3,293) 136 Deferred revenue 1,246 4,415 2,622 5,653 Changes in non-cash working capital items related to operations 2,677 3,946 (4,617) (1,686) Net cash provided by (used in) operating activities 4,184 7,179 (2,461) 2,248 Cash flows from financing activities: Repayment of long-term debt - (300) - (600) Payment of lease obligations (199) (178) (398) (422) Payment of dividends (2,208) (2,038) (2,208) (2,038) Interest paid (53) (178) (91) (297) Issuance of common shares on exercise of stock options 881 35 2,644 97 Shares repurchased and cancelled (673) - (673) - Net cash used in financing activities (2,252) (2,659) (726) (3,260) Cash flows from investing activities: Interest received 33 25 69 37 Transfer from short-term investments - - 22 - Acquisitions of property and equipment (163) (171) (265) (231) Deferred development costs (253) (258) (500) (467) Net cash used in investing activities (383) (404) (674) (661) Net increase (decrease) in cash and cash equivalents during the period 1,549 4,116 (3,861) (1,673) Cash and cash equivalents - beginning of period 15,825 17,215 21,235 23,004 Cash and cash equivalents - end of period $ 17,374 $ 21,331 $ 17,374 $ 21,331

See accompanying notes to the consolidated financial statements.

Consolidated Statements of Changes in Equity 
For the three and six -month periods ended October 31, 2023 and 2022
(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 - - - - 831 831 Other comprehensive income: Effective portion of changes in fair value on designated revenue hedges - - - (3,000) - (3,000) Exchange difference on translation of foreign operations (334) (334) Total comprehensive (loss) income  - - - (3,334) 831 (2,503) Shares repurchased and cancelled (25,800) (84) (589) - - (673) Stock-based Compensation - - 1,176 - - 1,176 Dividends to equity owners - - - - (2,208) (2,208) Share options exercised 161,249 3,388 (744) - - 2,644 Total transactions with owners of the Company 135,449 $ 3,304 $ (157) $ - $ (2,208) $ 939 Balance, October 31, 2023 14,718,286 $ 47,642 $ 15,128 $ (3,351) $ 9,455 $ 68,874 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 - - - (1,853) - (1,853) Exchange difference on translation of foreign operations - - - 192 - 192 Total comprehensive (loss) income  - - - (1,661) 755 (906) Stock-based Compensation - - 1,184 - - 1,184 Dividends to equity owners - - - - (2,038) (2,038) Share options exercised 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

See accompanying notes to the consolidated financial statements.

SOURCE Tecsys Inc.