TECSYS Reports Financial Results for Fourth Quarter and Full Year Fiscal 2017

July 6, 2017

MONTREAL, QUEBEC–(Marketwired – July 6, 2017) – 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 2017, ended April 30, 2017. All dollar amounts are expressed in Canadian currency and are prepared in accordance with International Financial Reporting Standards (IFRS).

“The fourth quarter of fiscal 2017 delivered strong results in revenue, profit, EBITDA and continued trends in controlling operating costs; it was the second-best quarterly revenue in the company’s history,” said Peter Brereton, President and CEO of TECSYS Inc. “Q4 was up 6% over the prior quarter and caps off a year that sets the stage for continued growth.”

“During the fourth quarter, the Company recognized $4.6 million of prior year federal non-refundable R&D tax credits which reduced gross R&D expenditures by a corresponding amount. This is as a result of the Company’s increased probability that these tax credits will be used in the future to reduce cash taxes” said Berty Ho, outgoing CFO of TECSYS Inc.

Fourth Quarter Highlights:

Total revenue was $18.4 million, 13% lower than $21.1 million for Q4 2016.
Proprietary products revenue decreased to $3.9 million, compared to $5.9 million for Q4 2016.
Services revenue decreased to $11.2 million, compared to $11.5 million in Q4 2016.
Total gross profit margin of 51% compared to 55% in Q4 2016.
Operating expenses decreased to $3.3 million, compared to $8.5 million for the same three-month period last year. Excluding the tax credits recognition of $4.6 million mentioned above, operating expenses were $7.9 million compared to $8.5 million.
Profit from operations of $6.0 million in Q4 2017 in comparison to $3.2 million for the same period in fiscal 2016. Excluding the tax credits recognition mentioned above, profit from operations was $1.4 million.
EBITDA was $6.7 million, compared to $3.8 million for the fourth quarter of 2016. Excluding the tax credit recognition mentioned above and $460,000 of unusual charges including severance and related legal costs, EBITDA was $2.5 million.
Profit of $4.8 million or $0.39 per share in Q4 2017 compared to $3.8 million or $0.31 per share for Q4 2016.
Total contract value bookings amounted to $11.1 million, in comparison to $13.1 million for Q4 2016.

“We were pleased to sign two significant hospital networks in the fourth quarter and see the average size of our new hospital contracts climb by approximately 50% for the full year of Fiscal 2017 compared to the prior year. While we experienced a slowing in new contract signing from the U.S. healthcare sector as a result of uncertainty around health insurance legislation, we continued to expand our clinical logistics solutions and increased penetration in our current customers,” added Mr. Brereton. “We completed some restructuring of management and sales in the fourth quarter to prepare the company for the next phase of growth. These one-time costs reduced EBITDA by $460,000.”

Results from Operations	3 Months Ended Apr. 30 2017	3 Months Ended Apr. 30 2016	12 Months Ended Apr. 30, 2017	12 Months Ended Apr. 30, 2016
In thousands of dollars except per share amounts
Total Revenue	$18,447	$21,144	$68,447	$67,466
Gross Margin	$9,384	$11,696	$34,196	$34,825
Gross Margin %	51%	55%	50%	52%
Operating Expenses	$3,334	$8,459	$26,245	$30,276
Op. Ex. As % of Revenue	18%	40%	38%	45%
Profit from Operations	$6,050	$3,237	$7,951	$4,549
EBITDA	$6,674	$3,837	$10,364	$7,164
EPS	$0.39	$0.31	$0.49	$0.39
Contract Bookings	$11,102	$13,064	$42,628	$42,195

Fiscal 2017 Highlights:

Revenue for fiscal 2017 was $68.4 million, up 1% from $67.5 million in the previous fiscal year.
Total gross profit margin reached 50% compared to 52% in fiscal 2016.
Operating expenses decreased to $26.2 million, compared to $30.3 million in the previous fiscal year, partially as a result of an increase in tax credits. Excluding the tax credits recognition of $4.6 million mentioned above, operating expenses were $30.8 million.
EBITDA for the year was $10.4 million, compared to $7.2 million in fiscal 2016. Excluding the tax credit recognition mentioned above, EBITDA was $5.8 million.
Profit from operations of $8.0 million in fiscal 2017 in comparison to $4.5 million in fiscal 2016. Excluding the tax credits recognition mentioned above, profit from operations was $3.4 million.
Net profit for fiscal 2017 was $6.0 million, or $0.49 per share, compared to $4.8 million, or $0.39 per share, for fiscal 2016.
Total contract bookings for fiscal 2017 totalled $42.6 million, compared to $42.2 million for fiscal 2016.
Recurring revenue at the end of fiscal 2017 was $26.9 million or 39% of total revenue, up from $25.0 million or 37% in fiscal 2016.
Cash and cash equivalents totalled $13.5 million at the end of fiscal 2017 compared to $9.7 million at the end of fiscal 2016.

The Board of Directors has appointed Brian Cosgrove as the new CFO effective immediately, replacing Berty Ho, who will be taking on a new role within the business.

The Company has declared a dividend of $0.045 per share to be paid on August 4, 2017 to shareholders of record at the close of business on July 21, 2017.

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

Subsequent to our fiscal year-end, the Company announced the closing of an offering of 1,000,000 common shares of the Corporation as well as an additional 100,050 common shares issued as a result of the exercise in full by the underwriters of their over-allotment option at a price of $15.00 per share, for gross proceeds of $16,500,750. The 2017 Offering includes a treasury offering of 767,050 Offered Shares by the Corporation for gross proceeds of $11,505,750.

Fourth Quarter and Full Year 2017 Results Conference Call

Date: July 7, 2017 Time: 8:30 am EDT

Phone number: (416) 981-9091 or (800) 694-7044

The call can be replayed until July 14, 2017 by calling (416) 626-4100 or (800) 558-5253 (access code: 21853999).

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, 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 needs 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.

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, 2016. 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).


TECSYS Inc.
Consolidated Statements of Financial Position
As at April 30, 2017 and April 30, 2016
(in thousands of Canadian dollars)
			April 30,			April 30,
			2017			2016
Assets
Current assets
	Cash and cash equivalents	$	13,476		$	9,704
	Accounts receivable		14,218			18,239
	Work in progress		612			513
	Other accounts receivable		370			1,393
	Tax credits		3,126			4,893
	Inventory		914			744
	Prepaid expenses		1,899			1,622
Total current assets			34,615			37,108
Non-current assets
	Tax credits		5,407			1,483
	Property and equipment		2,444			2,633
	Deferred development costs		2,751			3,817
	Other intangible assets		1,523			1,831
	Goodwill		3,596			3,596
	Deferred tax assets		2,201			2,222
Total non-current assets			17,922			15,582
Total assets		$	52,537		$	52,690
Liabilities
Current liabilities
	Accounts payable and accrued liabilities	$	9,265		$	10,399
	Current portion of long-term debt		69			1,455
	Deferred revenue		12,094			11,205
Total current liabilities			21,428			23,059
Non-current liabilities
	Long-term debt		121			1,889
	Other non-current liabilities		277			296
Total non-current liabilities			398			2,185
Total liabilities			21,826			25,244
Equity
	Share capital		8,349			8,349
	Contributed surplus		9,577			9,577
	Retained earnings		13,064			8,913
	Accumulated other comprehensive (loss) income		(279	)		607
Total equity attributable to the owners of the Company			30,711			27,446
Total liabilities and equity		$	52,537		$	52,690


TECSYS Inc.
Consolidated Statements of Income and Comprehensive Income
Three month periods and years ended April 30, 2017 and 2016
(in thousands of Canadian dollars, except per share data)
			Three Months Ended April 30, 2017 (unaudited)			Three Months Ended April 30, 2016 (unaudited)			Year Ended April 30, 2017			Year Ended April 30, 2016
Revenue:
	Proprietary products	$	3,908		$	5,941		$	11,914		$	13,623
	Third-party hardware and software products		2,659			3,092			8,852			9,421
	Services		11,195			11,489			45,207			42,479
	Reimbursable expenses		685			622			2,474			1,943
Total revenue			18,447			21,144			68,447			67,466
Cost of revenue:
	Products		1,986			3,184			7,128			8,198
	Services		6,392			5,642			24,649			22,500
	Reimbursable expenses		685			622			2,474			1,943
Total cost of revenue			9,063			9,448			34,251			32,641
Gross profit			9,384			11,696			34,196			34,825
Operating expenses:
	Sales and marketing		4,104			4,256			15,131			14,952
	General and administration		1,350			1,839			5,863			5,986
	Research and development, net of tax credits		(2,120	)		2,364			5,251			9,338
Total operating expenses			3,334			8,459			26,245			30,276
Profit from operations			6,050			3,237			7,951			4,549
Net finance (income) costs			(7	)		123			189			146
Profit before income taxes			6,057			3,114			7,762			4,403
Income tax expense (recovery)			1,281			(711	)		1,764			(401	)
Profit attributable to the owners of the Company		$	4,776		$	3,825		$	5,998		$	4,804
Other comprehensive (loss) income:
	Effective portion of changes in fair value on designated revenue hedges		(398	)		986			(886	)		512
Comprehensive income attributable to the owners of the Company		$	4,378		$	4,811		$	5,112		$	5,316
Basic and diluted earnings per common share		$	0.39		$	0.31		$	0.49		$	0.39


TECSYS Inc.
Consolidated Statements of Cash Flows
Years ended April 30, 2017 and 2016
(in thousands of Canadian dollars)
			Year			Year
			Ended			Ended
			April 30,			April 30,
			2017			2016
Cash flows from (used in) operating activities:
Profit for the year		$	5,998		$	4,804
Adjustments for:
	Depreciation of property and equipment		819			794
	Depreciation of deferred development costs		1,319			1,418
	Depreciation of other intangible assets		486			478
	Net finance costs		189			146
	Unrealized foreign exchange and others		649			(690	)
	Non-refundable tax credits		(5,551	)		(868	)
	Income taxes		1,332			(508	)
	Operating activities excluding changes in non-cash working capital items related to operations		5,241			5,574
	Accounts receivable		4,021			(5,669	)
	Work in progress		(99	)		191
	Other accounts receivable		(35	)		(118	)
	Tax credits		2,091			531
	Inventory		(170	)		315
	Prepaid expenses		(277	)		(228	)
	Accounts payable and accrued liabilities		(1,852	)		1,917
	Deferred revenue		889			1,107
	Changes in non-cash working capital items related to operations		4,568			(1,954	)
Net cash from operating activities			9,809			3,620
Cash flows used in financing activities:
	Repayment of long-term debt		(3,154	)		(1,445	)
	Purchase of share options for cancellation		–			(6	)
	Payment of dividends		(1,847	)		(1,232	)
	Interest paid		(81	)		(136	)
Net cash used in financing activities			(5,082	)		(2,819	)
Cash flows from (used in) investing activities:
	Interest received		103			65
	Acquisitions of property and equipment		(630	)		(988	)
	Proceeds on disposal of property and equipment		3			23
	Acquisitions of other intangible assets		(178	)		(125	)
	Deferred development costs		(253	)		(887	)
Net cash used in investing activities			(955	)		(1,912	)
Net increase (decrease) in cash and cash equivalents during the year			3,772			(1,111	)
Cash and cash equivalents – beginning of year			9,704			10,815
Cash and cash equivalents – end of year		$	13,476		$	9,704


TECSYS Inc.
Consolidated Statements of Changes in Equity
Years ended April 30, 2017 and 2016
(in thousands of Canadian dollars, except number of shares)
			Share capital
			Number	Amount		Contributed surplus		Accumulated other comprehensive income (loss)			Retained earnings			Total
Balance, April 30, 2016			12,315,326	$	8,349	$	9,577	$	607		$	8,913		$	27,446
	Profit for the year		–		–		–		–			5,998			5,998
	Other comprehensive loss for the year:
		Effective portion of changes in fair value on designated revenue hedges	–		–		–		(886	)		–			(886	)
Total comprehensive (loss) income for the year			–		–		–		(886	)		5,998			5,112
	Dividends to equity owners		–		–		–		–			(1,847	)		(1,847	)
Total transactions with owners of the Company			–		–		–		–			(1,847	)		(1,847	)
Balance, April 30, 2017			12,315,326	$	8,349	$	9,577	$	(279	)	$	13,064		$	30,711
Balance, April 30, 2015			12,315,326	$	8,349	$	9,577	$	95		$	5,341		$	23,362
	Profit for the year		–		–		–		–			4,804			4,804
	Other comprehensive income for the year:
		Effective portion of changes in fair value on designated revenue hedges	–		–		–		512			–			512
Total comprehensive income for the year			–		–		–		512			4,804			5,316
	Dividends to equity owners		–		–		–		–			(1,232	)		(1,232	)
Total transactions with owners of the Company			–		–		–		–			(1,232	)		(1,232	)
Balance, April 30, 2016			12,315,326	$	8,349	$	9,577	$	607		$	8,913		$	27,446

Solutions and general info: [email protected]
Investor relations: [email protected]
(514) 866-5800 ext. 4120
Media relations: [email protected]

TECSYS Inc.
(514) 866-0001 or (800) 922-8649

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