Tecsys Reports Financial Results for Fourth Quarter and Full Year Fiscal 2019 - Aggressive SaaS Focus Results in 46% Growth in Annual Recurring Revenue[i]
Tecsys Reports Financial Results for Fourth Quarter and Full Year Fiscal 2019 - Aggressive SaaS Focus Results in 46% Growth in Annual Recurring Revenue[i]
Canada NewsWire
MONTREAL, July 3, 2019
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."
In thousands of dollars except per share amounts | ||||
Results from | 3 Months Ended | 3 Months Ended | 12 Months Ended | 12 Months Ended |
Total Revenue | $23,191 | $18,908 | $76,449 | $70,718 |
Gross Profit | $10,909 | $9,565 | $37,441 | $34,875 |
Gross Margin % | 47% | 51% | 49% | 49% |
Operating Expenses | $11,746 | $7,816 | $39,239 | $30,621 |
Op. Ex. as % of Revenue | 51% | 41% | 51% | 43% |
(Loss) Profit from Operations | $(837) | $1,749 | $(1,798) | $4,254 |
Adjusted EBITDAii | $684 | $2,307 | $2,776 | $6,490 |
EPS | $0.01 | $0.13 | $(0.06) | $0.30 |
Contract Bookingsi | $19,249 | $14,731 | $63,210 | $48,100 |
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: [email protected]
- Investor Relations: [email protected] or (514) 866-5800 ext. 4120
- Media Relations: [email protected]
- 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:
(in thousands of Canadian dollars) | ||||||||
Three Months | Three Months | Twelve Months | Twelve Months | |||||
Ended | Ended | Ended | Ended | |||||
April 30, | April 30, | April 30, | April 30, | |||||
2019 | 2018 | 2019 | 2018 | |||||
Profit (loss) for the year | $ | 79 | $ | 1,802 | $ | (741) | $ | 3,949 |
Adjustments for: | ||||||||
Depreciation of property and equipment | 230 | 198 | 879 | 760 | ||||
Amortization of deferred development costs | 172 | 262 | 949 | 1,118 | ||||
Amortization of other intangible assets | 493 | 114 | 995 | 462 | ||||
Interest expense | 187 | 3 | 196 | 4 | ||||
Interest income | (26) | (86) | (197) | (259) | ||||
Income taxes | (1,018) | 14 | (1,018) | 456 | ||||
EBITDA | 117 | 2,307 | 1,063 | 6,490 | ||||
Adjustments for: | ||||||||
Acquisition related costs | 460 | - | 1,347 | - | ||||
Stock-based compensation | 107 | - | 366 | - | ||||
Adjusted EBITDA | 684 | 2,307 | 2,776 | 6,490 | ||||
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.
Tecsys Inc. | |||||
Consolidated Statements of Financial Position | |||||
As at April 30, 2019 and April 30, 2018 | |||||
(in thousands of Canadian dollars) | |||||
April 30, | April 30, | ||||
2019 | 2018 | ||||
Assets | |||||
Current assets | |||||
Cash and cash equivalents | $ | 14,913 | $ | 13,496 | |
Accounts receivable | 14,986 | 13,939 | |||
Work in progress | 811 | 617 | |||
Other receivables | 392 | 535 | |||
Tax credits | 3,493 | 3,391 | |||
Inventory | 673 | 1,145 | |||
Prepaid expenses | 3,223 | 1,829 | |||
Total current assets | 38,491 | 34,952 | |||
Non-current assets | |||||
Long-term investments | - | 10,007 | |||
Other long-term receivables | 278 | 215 | |||
Tax credits | 5,260 | 4,840 | |||
Property and equipment | 2,714 | 3,091 | |||
Deferred development costs | 1,064 | 1,850 | |||
Other intangible assets | 14,706 | 1,342 | |||
Goodwill | 17,456 | 3,596 | |||
Deferred tax assets | 5,476 | 3,524 | |||
Total non-current assets | 46,954 | 28,465 | |||
Total assets | $ | 85,445 | $ | 63,417 | |
Liabilities | |||||
Current liabilities | |||||
Accounts payable and accrued liabilities | $ | 11,633 | $ | 9,087 | |
Deferred revenue | 14,252 | 10,774 | |||
Current portion of long-term debt | 1,022 | 47 | |||
Other current liabilities | 4,111 | - | |||
Total current liabilities | 31,018 | 19,908 | |||
Non-current liabilities | |||||
Long-term debt | 10,827 | 74 | |||
Other non-current liabilities | 2,333 | 300 | |||
Deferred tax liabilities | 1,769 | - | |||
Total non-current liabilities | 14,929 | 374 | |||
Total liabilities | 45,947 | 20,282 | |||
Equity | |||||
Share capital | 19,144 | 19,144 | |||
Contributed surplus | 9,943 | 9,577 | |||
Retained earnings | 10,618 | 14,527 | |||
Accumulated other comprehensive income (loss) | (207) | (113) | |||
Total equity attributable to the owners of the Company | 39,498 | 43,135 | |||
Total liabilities and equity | $ | 85,445 | $ | 63,417 | |
See accompanying notes to the consolidated financial statements. | |||||
Tecsys Inc. | ||||||||
Consolidated Statements of Income and Comprehensive Income | ||||||||
Three and twelve months periods ended April 30, 2019 and 2018 | ||||||||
(in thousands of Canadian dollars, except per share data) | ||||||||
Three Months | Three Months | Twelve Months | Twelve Months | |||||
Ended | Ended | Ended | Ended | |||||
April 30, 2019 | April 30, 2018 | April 30, 2019 | April 30, 2018 | |||||
Revenue: | ||||||||
Proprietary products | $ 1,606 | $ 3,072 | $ 6,948 | $ 6,895 | ||||
Third-party products | 2,694 | 1,935 | 6,822 | 6,847 | ||||
Cloud, maintenance and subscription | 9,360 | 6,895 | 31,282 | 27,000 | ||||
Professional services | 9,002 | 6,470 | 29,338 | 27,830 | ||||
Reimbursable expenses | 529 | 536 | 2,059 | 2,146 | ||||
Total revenue | 23,191 | 18,908 | 76,449 | 70,718 | ||||
Cost of revenue: | ||||||||
Products | 2,377 | 1,689 | 6,036 | 6,187 | ||||
Services | 9,376 | 7,118 | 30,913 | 27,510 | ||||
Reimbursable expenses | 529 | 536 | 2,059 | 2,146 | ||||
Total cost of revenue | 12,282 | 9,343 | 39,008 | 35,843 | ||||
Gross profit | 10,909 | 9,565 | 37,441 | 34,875 | ||||
Operating expenses: | ||||||||
Sales and marketing | 5,058 | 3,685 | 17,204 | 14,496 | ||||
General and administration | 2,836 | 1,550 | 9,354 | 6,328 | ||||
Research and development, net of tax credits | 3,852 | 2,581 | 12,681 | 9,797 | ||||
Total operating expenses | 11,746 | 7,816 | 39,239 | 30,621 | ||||
(Loss) profit from operations | (837) | 1,749 | (1,798) | 4,254 | ||||
Net finance income | 102 | (67) | (39) | (151) | ||||
(Loss) profit before income taxes | (939) | 1,816 | (1,759) | 4,405 | ||||
Income tax (benefit) expense | (1,018) | 14 | (1,018) | 456 | ||||
(Loss) Profit attributable to the owners of the Company | $ 79 | $ 1,802 | $ (741) | $ 3,949 | ||||
Other comprehensive (loss) income : | ||||||||
Effective portion of changes in fair value on designated revenue hedges | (142) | (309) | (14) | 166 | ||||
Exchange differences on translation of foreign operations | (80) | - | (80) | - | ||||
Comprehensive (loss) income attributable to the owners of the Company | $ (143) | $ 1,493 | $ (835) | $ 4,115 | ||||
Basic and diluted (loss) earnings per common share | $ 0.01 | $ 0.13 | $ (0.06) | $ 0.30 | ||||
See accompanying notes to the consolidated financial statements. | ||||||||
Tecsys Inc. | ||||||||
Consolidated Statements of Cash Flows | ||||||||
Three and twelve months periods ended April 30, 2019 and 2018 | ||||||||
(in thousands of Canadian dollars) | ||||||||
Three Months | Three Months | Twelve Months | Twelve Months | |||||
Ended | Ended | Ended | Ended | |||||
April 30, 2019 | April 30, 2018 | April 30, 2019 | April 30, 2018 | |||||
Cash flows from (used in) operating activities: | ||||||||
(Loss) Profit for the period | $ 79 | $ 1,802 | $ (741) | $ 3,949 | ||||
Adjustments for: | ||||||||
Depreciation of property and equipment | 230 | 198 | 879 | 760 | ||||
Amortization of deferred development costs | 172 | 262 | 949 | 1,118 | ||||
Amortization of other intangible assets | 493 | 114 | 995 | 462 | ||||
Net finance income | 102 | (67) | (39) | (151) | ||||
Unrealized foreign exchange and other | 507 | 385 | 275 | (465) | ||||
Non-refundable tax credits | (226) | (335) | (902) | (925) | ||||
Stock-based compensation | 107 | - | 366 | - | ||||
Income taxes | (1,182) | 38 | (1,182) | 361 | ||||
Net cash from operating activities excluding changes in non-cash working capital items related to operations | ||||||||
282 | 2,397 | 600 | 5,109 | |||||
Accounts receivable | 1,674 | (1,312) | 1,749 | 279 | ||||
Work in progress | 546 | (145) | (129) | (5) | ||||
Other receivable | (46) | (8) | 109 | (346) | ||||
Tax credits | 1,960 | 2,001 | (212) | (156) | ||||
Inventory | 98 | 282 | 476 | (231) | ||||
Prepaid expenses | (211) | (18) | (595) | 70 | ||||
Accounts payable and accrued liabilities | (434) | 17 | 795 | 294 | ||||
Deferred revenue | 92 | 758 | 1,307 | (1,320) | ||||
Changes in non-cash working capital items related to operations | 3,679 | 1,575 | 3,500 | (1,415) | ||||
Net cash from operating activities | 3,961 | 3,972 | 4,100 | 3,694 | ||||
Cash flows (used in) from financing activities: | ||||||||
Repayment of long-term debt | (237) | (14) | (272) | (69) | ||||
Issuance of long-term debt | - | - | 12,000 | - | ||||
Issuance of common shares | - | 35 | - | 10,489 | ||||
Payment of dividends | (719) | (654) | (2,747) | (2,486) | ||||
Interest paid | (115) | (3) | (115) | (4) | ||||
Net cash (used in) from financing activities | (1,071) | (636) | 8,866 | 7,930 | ||||
Cash flows from (used in) investing activities: | ||||||||
Decrease (increase) in long-term investments | 7 | - | 10,007 | (10,007) | ||||
Decrease in restricted cash | 12,000 | - | - | - | ||||
Interest received | 25 | 86 | 197 | 259 | ||||
Acquisitions of property and equipment | (134) | (528) | (403) | (1,358) | ||||
Acquisitions of other intangible assets | (68) | (40) | (160) | (281) | ||||
Deferred development costs | (76) | (73) | (163) | (217) | ||||
Business acquisitions | (11,147) | - | (21,027) | - | ||||
Net cash from (used in) investing activities | 607 | (555) | (11,549) | (11,604) | ||||
Net increase in cash and cash equivalents during the period | 3,497 | 2,781 | 1,417 | 20 | ||||
Cash and cash equivalents - beginning of period | 11,416 | 10,715 | 13,496 | 13,476 | ||||
Cash and cash equivalents - end of period | $ 14,913 | $ 13,496 | $ 14,913 | $ 13,496 | ||||
See accompanying notes to the consolidated financial statements. | ||||||||
Tecsys Inc. | |||||||||||
Consolidated Statements of Changes in Equity | |||||||||||
(in thousands of Canadian dollars, except number of shares) | |||||||||||
Share capital | Contributed | Accumulated | Retained | ||||||||
Number | Amount | surplus | other comprehensive | earnings | Total | ||||||
income (loss) | |||||||||||
Balance, April 30, 2017 | 12,315,326 | $ 8,349 | $ 9,577 | $ (279) | $ 13,064 | $ 30,711 | |||||
Profit for the year | - | - | - | - | 3,949 | 3,949 | |||||
Other comprehensive income for the period: | |||||||||||
Effective portion of changes in fair value on designated revenue hedges | - | - | - | 166 | - | 166 | |||||
Total comprehensive income for the period | - | - | - | 166 | 3,949 | 4,115 | |||||
Common shares issued under bought deal financing, net of taxes of $306 | 767,050 | 10,795 | - | - | - | 10,795 | |||||
Dividends to equity owners | - | - | - | - | (2,486) | (2,486) | |||||
Total transactions with owners of the Company | 767,050 | 10,795 | - | - | (2,486) | 8,309 | |||||
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) | |||||||||
Adjusted Balance, May 1, 2018 | 13,082,376 | $ 19,144 | $ 9,577 | $ (113) | $ 14,106 | $ 42,714 | |||||
Loss for the year | - | - | - | - | (741) | (741) | |||||
Other comprehensive income (loss) for the period: | |||||||||||
Effective portion of changes in fair value on designated revenue hedges | - | - | - | (14) | - | (14) | |||||
Exchange difference on translation of foreign operations | (80) | (80) | |||||||||
Stock Based Compensation | 366 | 366 | |||||||||
Total comprehensive income (loss) for the period | - | - | 366 | (94) | (741) | (469) | |||||
Dividends to equity owners | - | - | - | - | (2,747) | (2,747) | |||||
Total transactions with owners of the Company | - | - | - | - | (2,747) | (2,747) | |||||
Balance, April 30, 2019 | 13,082,376 | $ 19,144 | $ 9,943 | $ (207) | $ 10,618 | $ 39,498 | |||||
See accompanying notes to the consolidated financial statements. |
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.
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