TCS TECSYS Inc

TECSYS Inc. (TSX: TCS) an industry-leading supply chain management software company, today announced its results for the third quarter of fiscal year 2019, ended January 31, 2019. The unaudited interim financial statements are prepared in accordance with International Financial Reporting Standards (IFRS). All dollar amounts are expressed in Canadian dollars unless otherwise indicated.

Third Quarter Highlights:

• Total revenue increased 9% to $18.8 million from $17.2 million in Q3 2018.
• Proprietary products revenue increased 67% to $1.6 million from $0.9 million in Q3 2018.
• Cloud, maintenance and subscription revenue was $8.1 million, a 23% increase from $6.6 million in Q3 2018.
• Professional services revenue was flat at $7.3 million.
• Total gross profit margin was 50%, compared with 47% in Q3 2018.
• Operating expenses were $11.1 million, compared to $7.3 million for Q3 2018.
• Loss from operations was $1.7 million compared to a profit of $0.8 million for the same period in fiscal 2018.
• Operating profitability was impacted by $2.0 million of combined acquisition costs, expected and incurred operating losses from the acquired business, non-recurring marketing rebranding program costs and non-cash stock-compensation expenses.
• Total contract value bookings amounted to $17.1 million, a 42% increase compared to $12.0 million for the same period in fiscal 2018. During Q3 2019, the Company signed seven new accounts with a total contract value of $5.6 million compared to one new account with a total contract value of $1.3 million in Q3 2018.
• Cash and cash equivalents totaled $11.4 million at the end of Q3 fiscal 2019, compared to $13.5 million at the end of Q4 2018.

“With proprietary product revenue up 67%, total bookings up 42% and seven new accounts, this was a great quarter.  There were many successful milestones we achieved in the third quarter, including the launching our new global brand identity, the acquisition of OrderDynamics, and Bill King joining the team as Chief Revenue Officer,” said Peter Brereton, President and CEO of Tecsys Inc. “Additionally we continue to make strategic investments with our expansion into Europe through the acquisition of PCSYS A/S, announced on February 1. We are very pleased with the many important steps we undertook this past quarter to build upon our strong market position and best situate Tecsys for accelerated growth.” 

“Our bookings success has continued thanks to our strong pipeline, and as a result we achieved our second consecutive quarter of record booking levels. Consistent with our stated strategy, the Company is seeing increasing software as a service (SaaS) bookings.  Roughly 40% of new account license bookings in the quarter were on a SaaS basis.  Such bookings are recognized as revenue over the contract period as opposed to up-front sales of perpetual licenses. While this establishes a stream of recurring revenue, it will impact comparable quarterly revenue and operating profit in the medium term,” added Mark J. Bentler, Chief Financial Officer of Tecsys Inc.

In thousands of dollars except per share amounts:

Results from Operations	Q3 2019 Jan. 31, 2019	Q3 2018Jan. 31, 2018	9 months ended Jan. 31, 2019	9 months ended Jan. 31, 2018	Trailing 12 months ended Jan. 31, 2019	Trailing 12 months ended Jan. 31, 2018
Total Revenue	$   18,792	$   17,227	$   53,258	$   51,810	$  72,166	$   70,257
Recurring Revenue1	8,095	6,569	21,922	20,105	28,817	26,978
Gross Margin	9,438	8,120	26,532	25,310	36,097	34,694
Gross Margin %	50%	47%	50%	49%	50%	49%
Operating Expenses	11,125	7,275	27,493	22,805	35,309	26,139
Op. Ex. As % of Revenue	59%	42%	52%	44%	49%	37%
(Loss) Profit from Operations	(1,687)	845	(961)	2,505	788	8,5553
EBITDA2	(1,012)	1,312	946	4,183	3,253	10,8573
Adj. EBITDA2	(98)	1,312	2,092	4,183	4,399	10,8573
EPS	(0.11)	0.06	(0.06)	0.17	0.07	0.563
Contract Bookings	17,098	12,024	43,963	33,369	58,694	44,471

1 Recurring revenue is comprised of cloud, maintenance and subscription revenue

2 This is a non-IFRS measure. Please refer to the “Non-IFRS Measure” section below

3 Recognized $4.6 million of Canadian federal non-refundable R&D tax credit

First Nine Months Highlights:

• Total revenue was $53.3 million, an increase from $51.8 million for the first nine months of fiscal 2018.
• Proprietary products revenue increased to $5.3 million, compared to $3.8 million for the first nine months of fiscal 2018.
• Cloud, maintenance and subscription revenue was $21.9 million, compared with $20.1 million for the first nine months of fiscal 2018.
• Professional services revenue was $20.3 million, compared with $21.4 million in the first nine months of fiscal 2018.
• Total gross profit margin was 50% compared with 49% for the first nine months of fiscal 2018.
• Operating expenses were $27.5 million, compared to $22.8 million for the first nine months of 2018.
• Loss from operations was $1.0 million, compared to profit of $2.5 million for the same period in fiscal 2018.
• Operating profitability was impacted by $2.3 million of combined acquisition costs, expected and incurred operating losses from the acquired business, non-recurring marketing rebranding program costs and non-cash stock-compensation expenses.
• Net loss was $0.8 million or $(0.06) per share compared with a profit of $2.1 million or $0.17 per share for the same period in fiscal 2018.
• Total contract value bookings amounted to $44.0 million, compared to $33.4 million for the first nine months of 2018.

The Company has declared a dividend of $0.055 per share to be paid on April 11, 2019 to shareholders of record at the close of business on March 21, 2019.

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

Third Quarter 2019 Results Conference Call

Date: March 1, 2019

Time: 8:30 am EST

Phone number: (416) 981-9011 or (800) 763-5615

The call can be replayed until March 8th, 2019 by calling (416) 626-4100 or (800) 558-5253 (access code: 21916614).

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.

Over 600 mid-size and Fortune 1000 customers 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.

Contact

Solutions and General info: info@tecsys.com

Investor Relations: steve.li@tecsys.com, (514) 866-5800 ext. 4120

Media Relations: adam.polka@tecsys.com 

By phone: (514) 866-0001 or (800) 922-8649 

Non-IFRS Measure

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 less acquisition related costs and stock-based compensation. 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-months periods ending January 31 of fiscal 2019 and 2018, derived from IFRS measures in the Company’s condensed interim consolidated financial statements, is as follows:

		Three-months ended January 31, 2019		Three-months ended January 31, 2018		Nine-months ended January 31, 2019		Nine-months ended January 31, 2018
Profit for the period	$ (1,429)		$  722		$  (820)		$  2,147
Adjustments for:
Depreciation of property and equipment	214		157		649		562
Depreciation of deferred development costs	219		257		777		856
Depreciation of other intangible assets	259		113		502		348
Interest expense	9		-		9		1
Interest income	(26)		(77)		(171)		(173)
Income taxes	(258)		140		-		442
EBITDA	$  (1,012)		$  1,312		$  946		$  4,183
Adjustments for:
Acquisition related costs	772		-		887		-
Stock-based compensation	142		-		259		-
Adjusted EBITDA	$  (98)		$  1,312		$  2,092		$  4,183

Acquisition related costs: These costs mainly pertain to professional fees related to the acquisition of Order Dynamics and PCSYS.

Stock-based compensation: expense related to the issuance of stock options to employees and directors of the Company.

TECSYS Inc.
Condensed Interim Consolidated Statements of Financial Position
As at January 31, 2019 and April 30, 2018
(in thousands of Canadian dollars)
		January  31,		April 30,
		2019		2018
		(Unaudited)
Assets
Current assets
Cash and cash equivalents	$	11,416	$	13,496
Restricted cash		12,000		-
Accounts receivable		14,727		13,939
Work in progress		1,292		617
Other receivables		508		535
Tax credits		5,720		3,391
Inventory		767		1,145
Prepaid expenses		2,878		1,829
Total current assets		49,308		34,952
Non-current assets
Long-term investments		-		10,007
Other long-term receivables		208		215
Tax credits		5,048		4,840
Property and equipment		2,756		3,091
Deferred development costs		1,161		1,850
Other intangible assets		6,891		1,342
Goodwill		10,709		3,596
Deferred tax assets		3,984		3,524
Total non-current assets		30,757		28,465
Total assets	$	80,065	$	63,417
Liabilities
Current liabilities
Accounts payable and accrued liabilities	$	12,631	$	9,087
Current portion of long-term debt		947		47
Deferred revenue		13,388		10,774
Total current liabilities		26,966		19,908
Non-current liabilities
Long-term debt		11,139		74
Other non-current liabilities		1,707		300
Total non-current liabilities		12,846		374
Total liabilities		39,812		20,282
Equity
Share capital		19,144		19,144
Contributed surplus		9,836		9,577
Retained earnings		11,258		14,527
Accumulated other comprehensive income (loss)		15		(113	)
Total equity attributable to the owners of the Company		40,253		43,135
Total liabilities and equity	$	80,065	$	63,417
See accompanying notes to the unaudited condensed interim consolidated financial statements.

 

TECSYS Inc.
Condensed Interim Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)
Three and nine month periods ended January 31, 2019 and 2018
(in thousands 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,
	2019			2018			2019			2018
	(unaudited)			(unaudited)			(unaudited)			(unaudited)
Revenue:
Proprietary products	1,556		$	930		$	5,342		$	3,823		$
Third-party products	1,316			1,943			4,128			4,912
Cloud, maintenance and subscription	8,095			6,569			21,922			20,105
Professional services	7,338			7,332			20,336			21,360
Reimbursable expenses	487			453			1,530			1,610
Total revenue	18,792			17,227			53,258			51,810
Cost of revenue:
Products	1,015			1,766			3,659			4,498
Services	7,852			6,888			21,537			20,392
Reimbursable expenses	487			453			1,530			1,610
Total cost of revenue	9,354			9,107			26,726			26,500
Gross profit	9,438			8,120			26,532			25,310
Operating expenses:
Sales and marketing	4,612			3,327			12,146			10,811
General and administration	3,007			1,591			6,518			4,778
Research and development, net of tax credits	3,506			2,357			8,829			7,216
Total operating expenses	11,125			7,275			27,493			22,805
(Loss) profit from operations	(1,687	)		845			(961	)		2,505
Net finance income	-			(17	)		(141	)		(84	)
(Loss) profit before income taxes	(1,687	)		862			(820	)		2,589
Income tax (recovery) expense	(258	)		140			-			442
(Loss) Profit attributable to the owners of the Company	(1,429	)	$	722		$	(820	)	$	2,147		$
Other comprehensive income :
Effective portion of changes in fair value on designated revenue hedges	122			335			128			475
Comprehensive (loss) income attributable to the owners of the Company	(1,307	)	$	1,057		$	(692	)	$	2,622		$
Basic and diluted (loss) earnings per common share	(0.11	)	$	0.06		$	(0.06	)	$	0.17		$
See accompanying notes to the unaudited condensed interim consolidated financial statements.

 

TECSYS Inc.
Condensed Interim Consolidated Statements of Cash Flows
Three and nine month periods ended January 31, 2019 and 2018
(in thousands of Canadian dollars)
		Three MonthsEndedJanuary 31,2019(unaudited)			Three MonthsEndedJanuary 31,2018(unaudited)			Nine MonthsEndedJanuary 31,2019(unaudited)			Nine MonthsEndedJanuary 31,2018 (unaudited)
Cash flows from (used in) operating activities:
Profit for the year	$	(1,429	)	$	722		$	(820	)	$	2,147
Adjustments for:
Depreciation of property and equipment		214			157			649			562
Depreciation of deferred development costs		219			257			777			856
Depreciation of other intangible assets		259			113			502			348
Net finance (income)		-			(17	)		(141	)		(84	)
Unrealized foreign exchange and other		(261	)		(294	)		(232	)		(850	)
Non-refundable tax credit		(201	)		(222	)		(676	)		(590	)
Stock-based compensation		142			-			259			-
Income taxes		(265	)		113			-			323
Operating activities excluding changes in non-cash working
capital items related to operations		(1,322	)		829			318			2,712
Accounts receivable		(379	)		(1,280	)		75			1,591
Work in progress		(392	)		53			(675	)		140
Other receivable		77			(11	)		155			(338	)
Tax credits		(755	)		(828	)		(2,172	)		(2,157	)
Inventory		111			(552	)		378			(513	)
Prepaid expenses		45			(152	)		(384	)		88
Accounts payable and accrued liabilities		2,047			799			1,229			277
Deferred revenue		1,076			757			1,215			(2,078	)
Changes in non-cash working capital items related to operations		1,830			(1,214	)		(179	)		(2,990	)
Net cash from (used in) operating activities		508			(385	)		139			(278	)
Cash flows (used in) financing activities:
Repayment of long-term debt		(12	)		(18	)		(35	)		(55	)
Proceeds from long-term debt		12,000			-			12,000			-
Issuance of common shares		-			-			-			10,454
Payment of dividends		(720	)		(654	)		(2,028	)		(1,832	)
Interest paid		-			-			-			(1	)
Net cash from (used in) financing activities		11,268			(672	)		9,937			8,566
Cash flows (used in) investing activities:
Long-term investments		10,000			-			10,000			(10,007	)
Business acquisition		(9,880	)		-			(9,880	)		-
Increase in restricted cash		(12,000	)		-			(12,000	)		-
Interest received		27			77			172			173
Acquisitions of property and equipment		(166	)		(577	)		(269	)		(830	)
Acquisitions of other intangible assets		(27	)		(114	)		(92	)		(241	)
Deferred development costs		(22	)		(72	)		(87	)		(144	)
Net cash used in investing activities		(12,068	)		(686	)		(12,156	)		(11,049	)
Net decrease in cash and cash equivalents during the period		(292	)		(1,743	)		(2,080	)		(2,761	)
Cash and cash equivalents - beginning of period		11,708			12,458			13,496			13,476
Cash and cash equivalents - end of period		11,416			10,715		$	11,416		$	10,715
See accompanying notes to the consolidated financial statements.

 

TECSYS Inc.
Condensed Interim Consolidated Statements of Changes in Equity
Nine Month periods ended January 31, 2019 and 2018
(in thousands of Canadian dollars, except number of shares)
	Share capital				Contributed		Accumulated			Retained			Total
	Number		Amount		surplus		other comprehensive			earnings
							income (loss)
Balance, April 30, 2018	13,082,376	$	19,144	$	9,577	$	(113	)	$	14,527		$	43,135
Adjustment on initial application of IFRS 15	-		-		-		-			(421	)		(421	)
	13,082,376		19,144		9,577		(113	)		14,106			42,714
Profit for the year	-		-		-		-			(820	)		(820	)
Other comprehensive income for the year:
Effective portion of changes in fair value on designated revenue hedges	-		-		-		128			-			128
Total comprehensive income for the year	-		-		-		128			(820	)		(692	)
Dividends to equity owners										(2,028	)		(2,028	)
Stock based compensation	-		-		259		-			-			259
Total transactions with owners of the Company	-		-		259		-			(2,028	)		(1,769	)
Balance, January 31, 2019	13,082,376	$	19,144	$	9,836	$	15		$	11,258		$	40,253
Balance, April 30, 2017	12,315,326	$	8,349	$	9,577	$	(279	)	$	13,064		$	30,711
Profit for the year	-		-		-		-			2,147			2,147
Other comprehensive loss for the year:
Effective portion of changes in fair value on designated revenue hedges	-		-		-		475			-			475
Total comprehensive income (loss) for the year	-		-		-		475			2,147			2,622
Common shares issued under bought deal financing, net of taxes of $306	767,050		10,454		-		-			-			10,454
Dividends to equity owners	-		-		-		-			(1,832	)		(1,832	)
Total transactions with owners of the Company	767,050		10,454		-		-			(1,832	)		8,622
Balance, January 31, 2018	13,082,376	$	18,803	$	9,577	$	196		$	13,379		$	41,955
See accompanying notes to the consolidated financial statements.

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, 2018. 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.