TECSYS Reports Financial Results for the Second Quarter of Fiscal 2019

CBJ Newsmakers

Record breaking contract bookings of $16.2 million, highest in Company history

MONTREAL, Nov. 29, 2018 (GLOBE NEWSWIRE) — TECSYS Inc. (TSX: TCS) an industry-leading supply chain management software company, today announced its results for the second quarter of fiscal year 2019, ended October 31, 2018. 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.

Second Quarter Highlights:

  • Total revenue was $18.2 million, in line with $18.1 million for Q2 2018.
  • Proprietary products revenue increased 50% to $2.5 million from $1.6 million in Q2 2018.
  • Cloud, maintenance and subscription revenue was $6.8 million, a 6% increase from $6.4 million in Q2 2018.
  • Professional services revenue was $6.9 million compared with $7.9 million in Q2 2018 which included $1.0 million of deferred professional services revenue due to termination of a contract and its associated future obligations.
  • Total gross profit margin was 52%, even with 52% in Q2 2018.
  • Operating expenses were $8.7 million, compared to $7.8 million for Q2 2018.
  • Profit from operations was $0.8 million compared to $1.6 million for the same period in fiscal 2018.
  • EBITDA was $1.4 million, compared to $2.2 million for Q2 2018.
  • Total contract value bookings amounted to $16.2 million, up 41% compared to $11.5 million for the same period in fiscal 2018.
  • Backlog grew to $51.7 million, compared to $42.4 million at the end of Q2 2018.
  • Cash and cash equivalents, as well as redeemable short-term and long-term investments, totaled $21.7 million at the end of Q2 fiscal 2019, compared to $23.5 million at the end of Q4 2018.

“We have achieved record quarterly bookings driven by healthcare base accounts which grew 196% YoY,” said Peter Brereton, President and CEO of Tecsys Inc. “We are off to a good start with our recent acquisition, OrderDynamics. The OrderDynamics platform processed $40M worth of orders during black Friday week, an impressive 144% increase over last year.  Our pipeline remains strong and we will focus on capitalizing on our strong market position by growing our sales team and investing in marketing as we look to the second half of the year.”

In thousands of dollars except per share amounts:

 

Results from Operations Q2 2019 Q2 2018 6 months
ended
Oct. 31,
2018
6 months
ended
Oct. 31,
2017
Trailing 12
months
ended

Oct. 31, 2018
Trailing 12
months
ended

Oct. 31, 2017
 
Total Revenue $18,184   $18,072   $34,466   $34,583   $70,602   $70,415  
Gross Margin $9,510   $9,438   $17,373   $17,190   $34,779   $35,489  
Gross Margin % 52 % 52 % 50 % 50 % 49 % 50 %
Operating Expenses $8,686   $7,843   $16,368   $15,530   $31,459   $26,441
Op. Ex. As % of Revenue 48 % 43 % 47 % 45 % 45 % 38 %
Profit from Operations $824   $1,595   $726   $1,660   $3,320   $9,048
EBITDA $1,422   $2,184   1,958   $2,871   5,577   $11,486
EPS $0.05   $0.10   $0.05   $0.11   $0.24   $0.57
Contract Bookings $16,226   $11,453   $26,865   $21,345   $53,620   $47,037  
Backlog $51,657   $42,350          

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

The comparison of FY19 Q2 Operating Profit and EBITDA to prior year results is challenging given the impact of (a) $1.0 million of deferred professional services revenue recognized in FY18 Q2 resulting from the contract termination in that prior period and (b) costs related to the acquisition of OrderDynamics and stock-based compensation expenses of $0.2 million recognized in the current period.  That said, we are pleased with FY19 Q2 profitability and will continue to invest in sales and marketing and research and development to take advantage of market opportunity” said Mark J. Bentler, Chief Financial Officer.

First Half Fiscal 2019 Highlights:

  • Total revenue was $34.5 million, in line with $34.6 million for H2 2018.
  • Proprietary products revenue increased 31% to $3.8 million, compared to $2.9 million for H2 2018.
  • Cloud, maintenance and subscription revenue was $13.8 million, compared with $13.5 million for Q2 2018.
  • Professional services revenue was $13.0 million, compared with $14.0 million in H2 2018.
  • Total gross profit margin was even with H2 2018 at 50%.
  • Operating expenses were $16.4 million, compared to $15.5 million for Q2 2018.
  • Profit from operations was $0.7 million, compared to $1.7 million for the same period in fiscal 2018.
  • Profit was $0.6 million or $0.05 per share compared with $1.4 million or $0.11 per share in H2 2018.
  • EBITDA was $2.0 million, compared to $2.9 million for H2 2018.
  • Total contract value bookings increased 26% to $26.9 million, compared to $21.3 million for H2 2018.

The Company has increased its dividend to $0.055 per share to be paid on January 11, 2019 to shareholders of record at the close of business on December 21, 2018.

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

Second Quarter 2019 Results Conference Call

Date: November 30, 2018

Time: 8:30 am EST

Phone number: (416) 981-9070 or (888) 224-3715

The call can be replayed until December 7th, 2018 by calling (416) 626-4100 or (800) 558 5253 (access code: 21900462).

About TECSYS

TECSYS provides transformative supply chain solutions that equip our customers to succeed in a rapidly-changing omni-channel world. TECSYS solutions are built on a true enterprise supply chain platform, and include warehouse management, distribution and transportation management, supply management at point-of-use, as well as complete financial management and analytics solutions. Customers running on TECSYS’ Supply Chain Platform are confident knowing they can execute, day in and day out, regardless of business fluctuations or changes in technology, they can adapt and scale to any business need or size, and they can expand and collaborate with customers, suppliers and partners as one borderless enterprise. From demand planning to demand fulfillment, TECSYS puts power into the hands of both front-line workers and back office planners, and unshackles business leaders so they can see and manage their supply chains like never before.

TECSYS is the market leader in supply chain solutions for health systems and hospitals. 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

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. 2018. All names, trademarks, products, and services mentioned are registered or unregistered trademarks of their respective owners.

TECSYS Inc.            
Condensed Interim Consolidated Statements of Financial Position      
As at October 31, 2018 and April 30, 2018            
(in thousands of Canadian dollars)            
             
      October 31,   April 30,  
      2018    2018   
      (Unaudited)      
             
Assets            
             
Current assets            
  Cash and cash equivalents   $   11,708   $   13,496    
  Short-term investment       10,007       –     
  Accounts receivable       13,485       13,939    
  Work in progress       900       617    
  Other receivables       430       535    
  Tax credits       4,964       3,391    
  Inventory       878       1,145    
  Prepaid expenses       2,664       1,829    
Total current assets       45,036       34,952    
             
Non-current assets            
  Long-term investments       –        10,007    
  Other long-term receivables       208       215    
  Tax credits       4,978       4,840    
  Property and equipment       2,759       3,091    
  Deferred development costs       1,357       1,850    
  Other intangible assets       1,164       1,342    
  Goodwill       3,596       3,596    
  Deferred tax assets       3,595       3,524    
Total non-current assets       17,657       28,465    
             
Total assets   $   62,693   $   63,417    
             
Liabilities            
             
Current liabilities            
  Accounts payable and accrued liabilities   $   8,269   $   9,087    
  Current portion of long-term debt       47       47    
  Deferred revenue       11,894       10,774    
Total current liabilities       20,210       19,908    
             
Non-current liabilities            
  Long-term debt       51       74    
  Other non-current liabilities       294       300    
Total non-current liabilities       345       374    
Total liabilities       20,555       20,282    
Contingencies and commitments            
             
Equity            
             
  Share capital       19,144       19,144    
  Contributed surplus       9,694       9,577    
  Retained earnings       13,407       14,527    
  Accumulated other comprehensive income (loss)       (107 )     (113 )  
Total equity attributable to the owners of the Company     42,138       43,135    
             
             
             
Total liabilities and equity   $   62,693   $   63,417    
See accompanying notes to the unaudited condensed interim consolidated financial statements.  
             

 

TECSYS Inc.                  
Condensed Interim Consolidated Statements of Income and Comprehensive Income            
Three and six-month periods ended October 31, 2018 and 2017                  
(in thousands of Canadian dollars, except per share data)              
                   
  Six Months   Six Months   Three Months   Three Months    
  Ended   Ended   Ended   Ended    
  October 31,   October 31,   October,   October,    
  2018    2017    2018    2017     
  (unaudited)   (unaudited)   (unaudited)   (unaudited)    
                   
                   
Revenue:                  
  Proprietary products $   3,786     $   2,893     $   2,461     $   1,645      
  Third-party products     2,812         2,969         1,356         1,447      
  Cloud, maintenance and subscription     13,827         13,536         6,836         6,446      
  Professional services     12,998         14,028         6,931         7,884      
  Reimbursable expenses     1,043         1,157         600         650      
Total revenue     34,466         34,583         18,184         18,072      
                   
Cost of revenue:                  
  Products     2,644         2,732         1,369         1,372      
  Services     13,685         13,504         6,705         6,612      
  Reimbursable expenses     1,043         1,157         600         650      
Total cost of revenue     17,372         17,393         8,674         8,634      
                   
Gross profit     17,094         17,190         9,510         9,438      
                   
Operating expenses:                  
  Sales and marketing     7,534         7,484         4,100         3,851      
  General and administration     3,511         3,187         1,931         1,611      
  Research and development, net of tax credits     5,323         4,859         2,655         2,381      
Total operating expenses     16,368         15,530         8,686         7,843      
                   
Profit from operations     726         1,660         824         1,595      
                   
Net finance (income)     (141 )       (67 )       (49 )       (33 )    
                   
Profit before income taxes     867         1,727         873         1,628      
                   
Income taxes expense     258         302         277         272      
                   
                   
Profit attributable to the owners of the Company   609       1,425       596       1,356      
                   
Other comprehensive income (loss):                  
  Effective portion of changes in fair value on designated revenue hedges      6         140         (44 )       (655 )    
                   
Comprehensive income attributable to the owners of the Company   615     $   1,565       552       701      
                   
Basic and diluted earnings per common share   0.05       0.11       0.05       0.10      
                   
See accompanying notes to the unaudited condensed interim consolidated financial statements.              
                   

 

TECSYS Inc.                  
Condensed Interim Consolidated Statements of Cash Flows                  
Three and six-month periods ended October 31, 2018 and 2017                  
(in thousands of Canadian dollars)                  
                   
    Six Months   Six Months   Three Months   Three Months  
    Ended   Ended   Ended   Ended  
    October 31,   October 31,   October 31,   October 31,  
    2018    2017    2018    2017   
    (unaudited)   (unaudited)   (unaudited)   (unaudited)  
                   
Cash flows from (used in) operating activities:                  
Profit for the year $   609   $   1,356    $    596    $    1,356    
Adjustments for:                  
  Depreciation of property and equipment     435       202       212       202    
  Depreciation of deferred development costs     558       297       280       297    
  Depreciation of other intangible assets     243       117       121       117    
  Net finance (income)     (141 )     (33 )     (49 )     (33 )  
  Unrealized foreign exchange and other     29       266       (113 )     266    
  Non-refundable tax credit     (475 )     (179 )     (248 )     (179 )  
  Stock-based compensation     117       –        117       –     
  Income taxes     265       210       265       210    
  Operating activities excluding changes in non-cash working capital items related to operations     1,640       2,236       1,181       2,236    
                   
  Accounts receivable     454       391       (915 )     391    
  Work in progress     (283 )     170       374       170    
  Other receivable     78       27       262       27    
  Tax credits     (1,417 )     (641 )     (740 )     (641 )  
  Inventory     267       158       44       158    
  Prepaid expenses     (429 )     164       (18 )     164    
  Accounts payable and accrued liabilities     (818 )     702       35       702    
  Deferred revenue     139       (2,601 )     (1,518 )     (2,601 )  
  Changes in non-cash working capital items related to operations     (2,009 )     (1,630 )     (2,476 )     (1,630 )  
                   
Net cash (used in) from operating activities     (369 )     606       (1,295 )     606    
                   
Cash flows (used in) financing activities:                  
  Repayment of long-term debt     (23 )     (18 )     (11 )     (18 )  
  Issuance of common shares     –        (1 )     –        (1 )  
  Payment of dividends     (1,308 )     (1,178 )     (1,308 )     (1,178 )  
  Interest paid     –        –        –        –     
Net cash (used in) from financing activities     (1,331 )     (1,197 )     (1,319 )     (1,197 )  
                   
Cash flows (used in) investing activities:                  
  Long-term investments     –        (10,007 )     –        (10,007 )  
  Interest received     145       60       64       60    
  Acquisitions of property and equipment     (103 )     (165 )     (66 )     (165 )  
  Acquisitions of other intangible assets     (65 )     (85 )     (48 )     (85 )  
  Deferred development costs     (65 )     –        (10 )     –     
Net cash (used in) investing activities     (88 )     (10,197 )     (60 )     (10,197 )  
                   
Net decrease in cash and cash equivalents during the year     (2,674 )     (10,788 )     (2,674 )     (10,788 )  
                   
Cash and cash equivalents – beginning of year     14,382       23,246       14,382       23,246    
                   
Cash and cash equivalents – end of year     11,708       12,458    $    11,708    $    12,458    
                   
See accompanying notes to the consolidated financial statements.                  
                   

 

TECSYS Inc.                          
Condensed Interim Consolidated Statements of Changes in Equity                        
Six-Month periods ended October 31, 2018 and 2017                          
(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     –      –      –      –        609       609    
  Other comprehensive income for the year:                          
  Effective portion of changes in fair value on designated revenue hedges    –      –      –      6       –        6    
Total comprehensive income for the year     –      –      –      6       609       615    
                           
  Dividends to equity owners                     (1,308 )     (1,308 )  
Stock based compensation     –      –      117     –        –        117    
Total transactions with owners of the Company     –      –      117     –        (1,308 )     (1,191 )  
                           
Balance, October 31, 2018     13,082,376  $    19,144  $    9,694  $    (107 )  $    13,407    $    42,138    
                           
Balance, April 30, 2017     12,315,326  $    8,349  $    9,577  $    (279 )  $    13,064    $    30,711    
                           
  Profit for the year     –      –      –      –        1,425       1,425    
  Other comprehensive loss for the year:                          
  Effective portion of changes in fair value on designated revenue hedges    –      –      –      140       –        140    
Total comprehensive income (loss) for the year     –      –      –      140       1,425       1,565    
  Common shares issued under bought deal financing, net of taxes of $306     767,050     10,454     –      –        –        10,454    
  Dividends to equity owners     –      –      –      –        (1,178 )     (1,178 )  
Total transactions with owners of the Company     767,050     10,454     –      –        (1,178 )     9,276    
                           
Balance, October 31, 2017     13,082,376  $    18,803  $    9,577  $    (139 )  $    13,311    $    41,552    
                           
See accompanying notes to the consolidated financial statements.                          
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