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Press release content from Globe Newswire. The AP news staff was not involved in its creation.

Tecsys Reports Financial Results for the Third Quarter of Fiscal 2019

February 28, 2019

MONTREAL, Feb. 28, 2019 (GLOBE NEWSWIRE) -- 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 Q3 2019 Q3 2018 9 months ended 9 months ended Trailing 12 Trailing 12 Operations Jan. 31, 2019 Jan. 31, 2018 Jan. 31, 2019 Jan. 31, 2018 months ended Jan. months ended Jan. 31, 2019 31, 2018 --------------- ------------- ------------- -------------- -------------- ----------------- ----------------- Total Revenue $ 18,792 $ 17,227 $ 53,258 $ 51,810 $ 72,166 $ 70,257 --------------- ------------- ------------- -------------- -------------- ----------------- ----------------- Recurring 8,095 6,569 21,922 20,105 28,817 26,978 Revenue1 --------------- ------------- ------------- -------------- -------------- ----------------- ----------------- Gross Margin 9,438 8,120 26,532 25,310 36,097 34,694 --------------- ------------- ------------- -------------- -------------- ----------------- ----------------- Gross Margin % 50% 47% 50% 49% 50% 49% --------------- ------------- ------------- -------------- -------------- ----------------- ----------------- Operating 11,125 7,275 27,493 22,805 35,309 26,139 Expenses --------------- ------------- ------------- -------------- -------------- ----------------- ----------------- Op. Ex. As % of 59% 42% 52% 44% 49% 37% Revenue --------------- ------------- ------------- -------------- -------------- ----------------- ----------------- (Loss) Profit (1,687) 845 (961) 2,505 788 8,5553 from Operations --------------- ------------- ------------- -------------- -------------- ----------------- ----------------- 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 17,098 12,024 43,963 33,369 58,694 44,471 Bookings --------------- ------------- ------------- -------------- -------------- ----------------- -----------------

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 Three-months ended Nine-months ended Nine-months ended January 31, 2019 January 31, 2018 January 31, 2019 January 31, 2018 ------------------------- ------------------ ------------------ ----------------- ----------------- Profit for the period $ (1,429) $ 722 $ (820) $ 2,147 Adjustments for: Depreciation of property 214 157 649 562 and equipment Depreciation of deferred 219 257 777 856 development costs Depreciation of other 259 113 502 348 intangible assets 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) ------------------------------------------------------ - ----------- - -------- January31, 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 Three Nine Nine Months Months Months Months Ended Ended Ended Ended January January January January 31, 31, 31, 31, 2019 2018 2019 2018 (unaudite (unaudite (unaudite (unaudite d) d) d) d) ---------------------------------------------------------------- -------- - -------- - -------- - -------- - 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 122 335 128 475 hedges ---------------------------------------------------------------- ------ - - ------ - - ------ - - ------ - - Comprehensive (loss) income attributable to the owners of the (1,307 ) $ 1,057 $ (692 ) $ 2,622 $ Company ---------------------------------------------------------------- ------ - - ------ - - ------ - - ------ - - 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 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) --------------------------------------- - ------------ - - ------------ - - ----------- - - ---------------- - 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 219 257 777 856 costs 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 2,047 799 1,229 277 liabilities Deferred revenue 1,076 757 1,215 (2,078 ) Changes in non-cash working capital 1,830 (1,214 ) (179 ) (2,990 ) items related to operations --------------------------------------- - -------------- - -------------- - ------------- - ------------------ Net cash from (used in) operating 508 (385 ) 139 (278 ) activities --------------------------------------- - ------------ - - ------------ - - ----------- - - ---------------- - 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 11,268 (672 ) 9,937 8,566 activities --------------------------------------- - ------------ - - ------------ - - ----------- - - ---------------- - 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 (292 ) (1,743 ) (2,080 ) (2,761 ) equivalents during the period Cash and cash equivalents - beginning 11,708 12,458 13,496 13,476 of period Cash and cash equivalents - end of 11,416 10,715 $ 11,416 $ 10,715 period --------------------------------------- - ------------ - - ------------ - - ----------- - - ---------------- - 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 Accumul Retained Total ated other Number Amount surplus compreh earnings ensive 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 - - - 128 - 128 designated revenue hedges 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 - - - 475 - 475 designated revenue hedges Total comprehensive income (loss) for the - - - 475 2,147 2,622 year --------------------------------------------- ---------- - ------ - ----------- - ---- - - ------ - - ------ - Common shares issued under bought deal 767,050 10,454 - - - 10,454 financing, net of taxes of $306 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.