Tecsys Reports Financial Results for Fourth Quarter and Full Year Fiscal 2019 - Aggressive SaaS Focus Results in 46% Growth in Annual Recurring Revenue[i]

MONTREAL, July 3, 2019 /CNW/ -- Tecsys Inc. (TSX: TCS), an industry-leading supply chain management software company, today announced its results for the fourth quarter and full year of fiscal year 2019, ended April 30, 2019. All dollar amounts are expressed in Canadian currency and are prepared in accordance with International Financial Reporting Standards (IFRS).

Fourth Quarter Highlights:

• Total revenue was $23.2 million, 23% higher than $18.9 million for Q4 2018. This increase is primarily attributable to inclusion of revenues from OrderDynamics and PCSYS (fiscal 2019 acquisitions) in the quarter.
• Influenced by a shift to Software as a Service (SaaS) bookingsⁱ, proprietary products revenue decreased 48% to $1.6 million compared to Q4 2018 primarily due to a decrease in proprietary software license revenue. During Q4 2019, approximately 60% of software product bookings were SaaS compared to 4% in Q4 2018.
• Cloud, maintenance and subscription revenue increased 36% year-over-year to $9.4 million in Q4 2019 driven primarily by the acquisition of OrderDynamics and PCSYS and by 6% organic growth.
• Professional services revenue was $9.0 million, 39% higher than $6.5 million in Q4 2018, resulting from the acquisitions of OrderDynamics and PCSYS and also from 19% organic growth.
• Total gross profit increased to $10.9 million, up 14% from $9.6 million in Q4 2018.
• Total gross profit margin declined to 47% in Q4 2019 from 51% in Q4 2018 with the key driver being a decline in the mix of perpetual software license revenue influenced by a shift to SaaS.
• Operating expenses increased to $11.7 million, higher by $3.9 million or 50% compared to $7.8 million in Q4 2018. The increase was primarily driven by operating expenses from OrderDynamics and PCSYS as well as incremental investment in Sales and Marketing and Research and Development (R&D) combined with acquisition costs, stock-based compensation and bonus expense.
• Loss from operations was $0.8 million, compared to a profit of $1.7 million in Q4 2018. The decline was the result of OrderDynamics losses and increased operating expenses as well as the decline in perpetual software license revenue (influenced by a shift to SaaS) partially offset by higher professional services and cloud, maintenance and subscription margins and PCSYS profit.
• Profit was $0.1 million or $0.01 per share in Q4 2019 compared to $1.8 million or $0.13 per share for the same period in fiscal 2018.
• Adjusted EBITDAⁱⁱ was $0.7 million in Q4 2019 compared to $2.3 million in Q4 2018. As noted previously, the decline in perpetual license revenue influenced by the shift to SaaS bookings was a key contributor to the decline.
• Total contract value bookingsⁱ increased 31% from $14.7 million in Q4 2018 to $19.2 million in Q4 2019. During Q4 2019, the Company signed nine new accounts with a total contract value of $6.7 million compared to six new accounts with a total contract value of $8.3 million in Q4 2018.

"Fiscal 2019 was an exciting year for Tecsys," said Peter Brereton, President and CEO of Tecsys Inc. "The rapid shift to SaaS provides tremendous value creation and we made great progress on every significant front. In November 2018, we purchased OrderDynamics, a Canadian-based SaaS distributed order management solution business. This acquisition greatly extends our supply chain execution and warehouse management system offerings by adding omnichannel capabilities for our clients running complex retail supply chains. In February 2019, we continued our European expansion through the acquisition of PCSYS, a leading supplier of hardware and software solutions for warehouse management, transportation management and labelling systems. The integration of these businesses is well underway. In fiscal 2019, we signed 23 new accounts compared to 12 in fiscal 2018. On the healthcare front, fiscal 2019 was a tremendous year. We added six new hospital networks, including two that were signed in the fourth quarter. We are confident our expanding product suite offering and growing global reach should help us to continue to attain strong booking growth rates going forward. In January 2019, we unveiled our new brand. It is our inherent culture of excellence that drove the rebranding rather than the other way around. The feedback has been tremendous as both clients and employees recognize the brand as bringing clarity to our abilities to empower good companies to solve complex uncertainties in their supply chains."

Mark Bentler, Chief Financial Officer of Tecsys Inc., added, "We continue to make the transition from perpetual license revenues to SaaS which helps us to deliver a more robust, predictable recurring revenue stream. The financial impact of this transition can be seen in the Q4 fiscal 2019 results. Current revenue, margins and profitability are negatively impacted as SaaS subscription revenue is recognized monthly over multi-year terms whereas perpetual license revenues are typically recognized up front. This transition is happening even more rapidly than we had initially forecast. In fiscal 2019, SaaS subscription bookingsⁱ comprised approximately 33% of our software product bookingsⁱ compared to 2% in fiscal 2018."

Fiscal 2019 Highlights:

• Revenue for fiscal 2018 was $76.4 million, up 8% from $70.7 million in the previous fiscal year.
• Total gross profit margin remained steady at 49%.
• Operating expenses increased to $39.2 million, compared to $30.6 million in the previous fiscal year. The majority of the increase is attributable to OrderDynamics and PCSYS, which accounted for $3.6 million of this increase. Other factors include higher Sales and Marketing expenses including our rebranding program, higher R&D expenses, acquisition costs, stock-based compensation and legal costs.
• Loss from operations of $1.8 million in fiscal 2019 in comparison to a profit of $4.3 million in fiscal 2018. Most of the decline can be attributed to $1.5 million in OrderDynamics losses, $1.9 million increased investment in Sales and Marketing and R&D expenses and $1.3 million in acquisition costs. The shift to SaaS had a negative impact on profitability in fiscal 2019.
• Net loss for fiscal 2019 was $0.7 million, or ($0.06) per share, compared to a profit of $3.9 million, or $0.30 per share, for fiscal 2018.
• Adjusted EBITDAⁱⁱ for the year was $2.8 million, compared to $6.5 million in fiscal 2018.
• Total contract bookingsⁱ for fiscal 2019 totalled $63.2 million, compared to $48.1 million for fiscal 2018, an increase of 31%.
• Annual Recurring Revenueⁱ at April 30, 2019 was $38.3 million, up 46% from $26.2 million at April 30, 2018.

The Company has declared a quarterly dividend of $0.055 per share to be paid on August 2, 2019 to shareholders of record at the close of business on July 19, 2019.

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

Fourth Quarter 2019 Results Conference Call
Date: July 3, 2019
Time: 5:00 p.m. EDT
Phone number: (416) 981-9013 or (800) 931-1360
The call can be replayed until July 10th, 2019 by calling (416) 626-4100 or (800) 558-5253 (access code: 21926069).

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:investor@tecsys.com or (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. 2019. All names, trademarks, products, and services mentioned are registered or unregistered trademarks of their respective owners.

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 before acquisition related costs, stock-based compensation and non-recurring costs. The Company believes that this measure is 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 calculation for the three and twelve-months periods ending April 30, 2019 and 2018 derived from IFRS measures in the Company's Consolidated financial statements, is as follows:

Acquisition related costs: These costs mainly pertain to professional fees related to the acquisition of OrderDynamics and PCSYS.
Stock-based compensation: expense related to the issuance of stock options to employees and directors of the Company.

ⁱ  See Key Performance Indicators in Management's Discussion and Analysis of the 2019 Financial Statements
ⁱⁱ See Non-IFRS Performance Measure in Management's Discussion and Analysis of the 2019 Financial Statements

SOURCE Tecsys Inc.