Tecsys Inc. — Earnings Release 2021

Jun 29, 2021

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News Release

FOR IMMEDIATE RELEASE

Ref. # NRE2021-13

Tecsys Reports Financial Results for the Fourth Quarter and Full Year Fiscal 2021

Ninth consecutive quarter of record revenue; SaaS revenue up 113% for the full year

Montreal, June 29, 2021— Tecsys Inc. (TSX: TCS), an industry-leading supply chain management SaaS company, today announced its results for the fourth quarter and full year of fiscal year 2021, ended April 30, 2021. All dollar amounts are expressed in Canadian currency and are prepared in accordance with International Financial Reporting Standards (IFRS).

Fourth Quarter Highlights:

• SaaS revenue increased by 107% to $5.5 million in Q4 2021, up from $2.7 million in Q4 2020.

• Cloud, maintenance and subscription revenue increased 30% year-over-year to $13.8 million in Q4 2021, up from $10.6 million in Q4 2020. The performance was primarily driven by SaaS.

• Annual Recurring Revenue (ARR[i] ) at April 30, 2021 was up 9% to $52.5 million compared to $48.1 million at April 30, 2020 and up 6% sequentially from January 31, 2021 on a constant currency basis.

• During Q4 2021, SaaS subscription bookings[i] (measured on an ARR[i] basis) were $3.5 million, down 14% compared to a record $4.1 million in the fourth quarter of 2020 but up 252% sequentially from $1.0 million in Q3 2021.

• Professional services revenue was up 12% to $12.1 million in Q4 2021 compared to $10.8 million in Q4 2020.

• Total revenue was a record $32.4 million, 17% higher than $27.7 million reported for Q4 2020.

• Gross margin was 49% compared to 46% in the prior year quarter. Total gross profit increased to $15.7 million, up 22% from $12.9 million in Q4 2020.

• Operating expenses increased to $13.1 million, higher by $0.8 million or 6% compared to $12.3 million in Q4 fiscal 2020 with continuing investment in sales and marketing as well as research and development.

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• Profit from operations in Q4 2021 was $2.6 million, up 343% from $0.6 million in Q4 2020.

• Net profit was $2.0 million or $0.14 per share on a fully diluted basis in Q4 2021 compared to a net profit of $0.4 million or $0.03 per share for the same period in fiscal 2020.

• Adjusted EBITDA[ii] was $3.9 million in Q4 2021, up 101% compared to $2.0 million reported in Q4 2020.

“We are pleased by our record results as we wrap up an extraordinary year. Our performance for the fourth quarter of fiscal 2021, as well as full year, is a testament to the need for truly adaptable and agile solutions. It was humbling to watch our clients adapt their businesses with the help of our solutions in the midst of a pandemic,” said Peter Brereton, president and CEO of Tecsys Inc. “As we report our ninth straight quarter of record revenue, as well as several notable wins over the last year, we are ready to hit the ground running into FY22 with a very strong pipeline. Our strategy to transition to a SaaS model is proving to be a home run for Tecsys.”

Mark Bentler, chief financial officer of Tecsys Inc., added, “Our revenue mix continues to arc towards SaaS across both new accounts and existing account expansions and migrations. This accelerating transition is improving the quality and consistency of our revenue streams and increasing the lifetime value of our customer base.”

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Fiscal 2021 Highlights:

• SaaS revenue fiscal 2021 increased 113% to $19.2 million, up from $9.0 million in fiscal 2020.

• Cloud, maintenance and subscription revenue increased 29% year-over-year to $52.9 million in fiscal 2021, up from $41.1 million in fiscal 2020, driven primarily by SaaS revenue.

• SaaS subscription bookings[i] increased 9% to $9.5 million in fiscal 2021 compared to $8.8 million in fiscal 2020.

• Professional services revenue was up 17% to $47.4 million in fiscal 2021 compared to $40.6 million in fiscal 2020.

• Revenue for fiscal 2021 was $123.1 million, up 17% from $104.9 million reported in fiscal 2020.

• Total gross profit increased to $60.6 million, up $10.3 million or 20% in fiscal 2021 compared to $50.3 million in the same period last year.

• Total gross profit margin was 49% in fiscal 2021 compared to 48% for fiscal 2020.

• Net profit for fiscal 2021 was $7.2 million, or $0.49 per diluted share, compared to a profit $2.3 million or $0.18 per share, for fiscal 2020.

• Adjusted EBITDA[ii] for fiscal 2021 was $16.2 million, up 58% compared to $10.3 million for fiscal 2020.

On June 29, 2021, the Company declared a quarterly dividend of $0.065 per share payable on August 6, 2021 to shareholders of record at the close of business on July 16, 2021.

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

Fourth Quarter and Full Year Fiscal 2021 Results Conference Call

Date: June 30, 2021 Time: 8:30am EST Phone number: (877) 210-0456 or (416) 981-9006 The call can be replayed until July 7, 2021 by calling: (800) 558-5253 or (416) 626-4100 (access code: 21995521)

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About Tecsys

Tecsys is a global provider of supply chain solutions that equip the borderless enterprise for growth. Organizations thrive when they have the software, technology and expertise to drive operational greatness and deliver on their brand promise. Spanning healthcare, retail, service parts, third-party logistics, and general wholesale high-volume distribution industries, Tecsys delivers dynamic and powerful solutions for warehouse management, distribution and transportation management, supply management at point of use, retail order management, as well as complete financial management and analytics solutions. Tecsys’ shares are listed on the Toronto Stock Exchange under the ticker symbol TCS. For more information on Tecsys, visit www.tecsys.com.

Contact

Solutions and General info: info@tecsys.com Investor Relations: investor@tecsys.com Public 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 30, 2021. 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. 2021. All names, trademarks, products, and services mentioned are registered or unregistered trademarks of their respective owners.

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Non-IFRS Measures

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, fair value adjustment on contingent consideration, stock-based compensation and restructuring costs. 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 calculation for fiscal 2021, 2020 and 2019 derived from IFRS measures in the Company’s Consolidated financial statements, is as follows:

		2021		2020		2019
Net profit (loss)	$	7,188	$	2,346	$	(741)
Adjustments for:
Depreciation of property and equipment and right-of-		2,180		2,004		879
use assets
Amortization of deferred development costs		269		536		949
Amortization of other intangible assets		1,663		1,530		995
Interest expense		787		1,080		196
Interest income		(174)		(74)		(197)
Income taxes		3,169		1,234		(1,018)
EBITDA	$	15,082	$	8,656	$	1,063
Adjustments for:
Acquisition related costs		-		-		1,347
Stock based compensation		1,138		1,024		366
Fair value adjustment on contingent consideration
earnout – Tecsys A/S		-		171		-
Restructuringcosts		-		420		-
Adjusted EBITDA	$	16,220	$	10,271	$	2,776

i See Key Performance Indicators in Management’s Discussion and Analysis of the 2021 Financial Statements. ii See Non-IFRS Performance Measures in Management’s Discussion and Analysis of the 2021 Financial Statements.

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Consolidated Statements of Financial Position As at April 30, 2021 and April 30, 2020 (in thousands of Canadian dollars)

April 30, 2021	April 30, 2020
Assets Current assets Cash and cash equivalents $ 25,752 Short-term investments 20,100 Accounts receivable 16,840 Work in progress 182 Other receivables 2,034 Tax credits 5,359 Inventory 628 Prepaid expenses 4,897	$ 27,528 10,000 18,434 837 1,633 4,162 634 3,778
Total current assets 75,792	67,006
Non-current assets 303 Other long-term receivables Tax credits 3,904 Property and equipment 2,682 Right-of-use assets 7,245 Contract acquisition costs 2,678 Deferred development costs 1,088 Other intangible assets 12,194 Goodwill 17,417 Deferred tax assets 6,006	350 4,624 2,823 8,234 2,324 1,103 13,401 17,540 7,028
Total non-current assets 53,517	57,427
Total assets $ 129,309	$ 124,433
Liabilities Current liabilities Accounts payable and accrued liabilities $ 19,417 Deferred revenue 22,044 Current portion of long-term debt 1,216 Other current liabilities 500 Lease obligations 848	$ 19,933 16,163 1,231 4,670 922
Total current liabilities 44,025	42,919
Non-current liabilities Long-term debt 8,400 Deferred tax liabilities 1,499 Lease obligations 8,295	9,600 1,638 9,157
Total non-current liabilities 18,194	20,395
Total liabilities 62,219	63,314
Contingencies and other commitments Equity Share capital 42,700 Contributed surplus 11,745 Retained earnings 12,419 Accumulated other comprehensive income 226	40,901 10,964 8,838 416
Total equity attributable to the owners of the Company 67,090	61,119
Total liabilities and equity $ 129,309	$ 124,433

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Consolidated Statements of Income and Comprehensive Income Three and twelve-month periods ended April 30, 2021 and 2020 (in thousands of Canadian dollars, except per share data)

	Three months	Three months	Three months	Three months	Twelve months	Twelve months	Twelve months	Twelve months
		ended		ended		ended		ended
	April 30, 2021		April 30, 2020		April 30, 2021		April 30, 2020
Revenue:
Proprietary products	$	1,331	$	1,694	$	5,229	$	5,384
Third-party products		5,032		4,244		17,463		15,885
Cloud, maintenance and subscription		13,836		10,638		52,879		41,058
Professional services		12,124		10,823		47,375		40,616
Reimbursable expenses		51		351		155		1,912
Total revenue		32,374		27,750		123,101		104,855
Cost of revenue
Products		4,059		3,493		14,355		12,780
Services		12,541		11,010		47,961		39,845
Reimbursable expenses		51		351		155		1,912
Total cost of revenue		16,651		14,854		62,471		54,537
Gross profit		15,723		12,896		60,630		50,318
Operating expenses:
Sales and marketing		5,649		5,368		20,985		20,134
General and administration		2,427		2,637		10,396		9,821
Research and development, net of tax credits		5,016		4,297		18,568		15,235
Restructuringcosts		-		-		-		420
Total operating expenses		13,092		12,302		49,949		45,610
Profit from operations		2,631		594		10,681		4,708
Net finance costs		95		145		324		1,128
Profit before income taxes		2,536		449		10,357		3,580
Income tax expense		516		74		3,169		1,234
Net profit, attributable to the owners of the Company	$	2,020	$	375	$	7,188	$	2,346
Other comprehensive income:
Effective portion of changes in fair value on designated		(300)		627		(77)		696
revenue hedges
Exchange differences on translation of foreign operations		(632)		198		(113)		(73)
Comprehensive income attributable to the owners of the Company	$	1,088	$	1,200	$	6,998	$	2,969
Basic earnings per common share	$	0.14	$	0.03	$	0.50	$	0.18
Diluted earnings per common share	$	0.14	$	0.03	$	0.49	$	0.18

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Consolidated Statements of Cash Flows

Three and twelve-month periods ended April 30, 2021 and 2020 (in thousands of Canadian dollars)

	Three months	Three months	Three months	Three months	Twelve months	Twelve months	Twelve months	Twelve months
		ended		ended		ended		ended
	April 30, 2021		April	30, 2020	April 30, 2021		April 30, 2020
Cash flows from operating activities:
Net profit	$	2,020	$	375		$ 7,188		$ 2,346
Adjustments for:
Depreciation of property and equipment and right-of-use-assets		567		542		2,180		2,005
Amortization of deferred development costs		60		119		269		536
Amortization of other intangible assets		404		398		1,663		1,530
Net finance costs		95		145		324		1,128
Unrealized foreign exchange and other		(184)		352		(1,130)		(245)
Non-refundable tax credits		(392)		(355)		(1,395)		(1,398)
Stock-based compensation		210		214		1,138		1,024
Income taxes		215		(406)		2,545		399
Net cash from operating activities excluding changes in non-cash
working capital items related to operations		2,995		1,384		12,782		7,325
Accounts receivable		(1,516)		(1,910)		1,552		(3,434)
Work in progress		364		(161)		652		(27)
Other receivables		376		(11)		289		(315)
Tax credits		1,841		1,797		(724)		103
Inventory		320		175		5		38
Prepaid expenses		(243)		207		(1,120)		(1,089)
Contract acquisition costs		(90)		(1,624)		(354)		(1,788)
Accounts payable and accrued liabilities		645		5,169		137		7,285
Deferred revenue		3,426		1,120		5,894		1,908
Changes in non-cash workingcapital items related to operations		5,123		4,762		6,331		2,681
Net cash from operating activities		8,118		6,146		19,113		10,006
Cash flows from financing activities:
Repayment of long-term debt		(312)		(308)		(1,215)		(1,018)
Payment of lease obligations		(233)		(262)		(929)		(993)
Issuance of common shares, net of transaction costs of $1,281		-		21,719		-		21,719
Payment of dividends		(940)		(785)		(3,607)		(3,009)
Deferred payment related to business acquisition		-		-		(2,191)		-
Common shares issued on exercise of stock options		630		12		1,442		12
Interestpaid		(150)		(139)		(638)		(854)
Net cash(used in) from financing activities		(1,005)		20,237		(7,138)		15,857
Cash flows from investing activities:
Purchase of short-term investments		-		(10,000)		(10,000)		(10,000)
Interest received		18		11		174		74
Acquisitions of property and equipment		(185)		(231)		(962)		(934)
Acquisitions of other intangible assets		(9)		(42)		(569)		(196)
Deferred development costs		(51)		(70)		(254)		(575)
Payments related toprior business acquisitions		(672)		(471)		(2,140)		(1,617)
Net cash used in investing activities		(899)		(10,803)		(13,751)		(13,248)
Net increase (decrease) in cash and cash equivalents during the period		6,214		15,580		(1,776)		12,615
Cash and cash equivalents - beginningofperiod		19,538		11,948		27,528		14,913
Cash and cash equivalents - end ofperiod	$	25,752	$	27,528	$	25,752	$	27,528

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Consolidated Statements of Changes in Equity

(in thousands of Canadian dollars, except number of shares)

		Share capital Number Amount Contributed surplus Accumulated other comprehensive income (loss) Retained earnings Total
Balance, May 1, 2020		14,416,543 $ 40,901 $ 10,964 $ 416 $ 8,838 $ 61,119
Net profit Other comprehensive income: Effective portion of changes in fair value on designated revenue hedges Exchange difference on translation of foreign operations		- - - - 7,188 7,188 - - - (77) - (77) - - - (113) - (113)
Total comprehensive income		- - - (190) 7,188 6,998
Stock-based compensation Dividends to equity owners Share options exercised		- - 1,138 - - 1,138 - - - - (3,607) (3,607) 88,552 1,799 (357) - - 1,442
Total transactions with owners of the Company		88,552 1,799 781 - (3,607) (1,027)
Balance, April 30, 2021		14,505,095 $ 42,700 $ 11,745 $ 226 $ 12,419 $ 67,090
Balance, May 1, 2019		13,082,376 $ 19,144 $ 9,943 $ (207) $ 9,501 $ 38,381
Net profit Other comprehensive income: Effective portion of changes in fair value on designated revenue hedges Exchange difference on translation of foreign operations		- - - - 2,346 2,346 - - - 696 - 696 - - - (73) - (73)
Total comprehensive income		- - - 623 2,346 2,969
Dividends to equity owners Stock-based compensation Share options exercised Common shares issued under bought deal financing, net of share issue costs of $1,707 and deferred taxes of $449		- - - - (3,009) (3,009) - - 1,024 - - 1,024 834 15 (3) - - 12 1,333,333 21,742 - - - 21,742
Total transactions with owners of the Company		1,334,167 21,757 1,021 - (3,009) 19,769
Balance, April 30, 2020		14,416,543 $ 40,901 $ 10,964 $ 416 $ 8,838 $ 61,119

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