Tecsys Inc. — Management Reports 2021

Jun 29, 2021

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Management Discussion and Analysis (MD&A) dated June 29, 2021 comments on our operations, financial performance and financial condition as at and for the years ended April 30, 2021 and April 30, 2020 and should be read in conjunction with the consolidated financial statements of Tecsys Inc. (“Tecsys”, the “Company”) and Notes thereto, which are included in this document. Fiscal 2021 refers to the twelve-month period ended April 30, 2021 and Fiscal 2020 refers to the twelvemonth period ended April 30, 2020.

The Company prepares its consolidated financial statements in accordance with International Financial Reporting Standards (“IFRS”). The consolidated financial statements are prepared by and are the responsibility of the Company’s Management. This document and the consolidated financial statements are expressed in Canadian dollars unless otherwise indicated. The consolidated financial statements were authorized for issue by the Board of Directors on June 29, 2021. Additional information about the Company can be obtained from SEDAR at www.sedar.com.

Overview

Tecsys is a global provider of SaaS supply chain solutions that equip the borderless enterprise for growth. Spanning multiple complex, regulated and 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 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. As their businesses grow more complex, organizations operating a Tecsys platform can adapt and scale to business needs or size, expand and collaborate with customers, suppliers and partners as one borderless enterprise, and transform their supply chains at the speed that their growth demands. From demand planning to demand fulfillment, Tecsys puts power into the hands of both front-line workers and back-office planners, helping business leaders operate sustainable and scalable logistics so they may focus on the future of their products, services and people, not on their operational challenges.

Customers around the world trust their supply chains to Tecsys in the healthcare, service parts, third-party logistics, retail and general wholesale high- volume distribution industries. Tecsys is the market leader in North America for supply chain solutions for health systems and hospitals. Largely stimulated by the 2018 acquisition of OrderDynamics Corporation (“OrderDynamics”), Tecsys serves a number of major customers in the retail industry located in Canada, the U.S., Europe and Australia, and continues to expand its retail footprint across these markets.

The Company’s global footprint also continues to grow. Tecsys’ 2019 acquisition of Danish warehouse management and mobile data solutions company PCSYS A/S, now Tecsys A/S, continues to serve as a key European extension. The Tecsys A/S product line has been brought under the Tecsys brand and Tecsys A/S continues to add customers in the manufacturing, retail and logistics industries, primarily in Europe. This alignment extends brand awareness to the European market and provides a common corporate identity to leverage existing software solutions across global geographies. In parallel, Tecsys A/S products are being positioned for North American markets, and opportunities for solution cross-pollination continue to emerge.

Tecsys is also well positioned to enable organizations pursuing sustainability initiatives. With greater adoption of digital purchasing comes a higher number of smaller shipments, which carry a substantial environmental impact. As supply chain organizations structure themselves for a shifting balance between in-store showrooming and digital shopping and shipping, the need to control the increasing costs of moving one line item from point A to point B becomes economically and environmentally significant. Tecsys has been recognized by Supply & Demand Chain Executive with a 2020 Green Supply Chain Award for its . enablement of operational efficiency and capacity to address sustainability targets[1]

1 https://digital.acbusinessmedia.com/SDC/MISC/sdc1220_green-awards.pdf

Tecsys has noted exponential growth in the e-commerce sector with mounting pressure for distribution organizations to fulfil higher order volumes under changing customer demands. As COVID-19 accelerated consumer adoption of digital commerce, order fulfillment complexity for retail and direct-to-consumer companies have been driving investment in order management systems (OMS). Tecsys’ OMS offering orchestrates and optimizes the process of customer order fulfillment across a wide variety of inventory-holding locations by meeting customer expectations at the lowest possible cost of order fulfillment.

Tecsys’ management believes that demand for OMS systems will continue to increase as a result of a shift in consumer shopping behavior following COVID-19. The restrictions on conventional in-store retail shopping in early 2020 has accelerated consumer demand for alternative fulfillment options such as curbside pickup, click-and-collect and ship-from-store. Tecsys’ OMS is wellpositioned to equip retailers for this expanded consumer demand.

Tecsys’ partnership strategy continued to develop and mature during fiscal 2021. Foundational relationships with key technology partners including International Business Machines Corporation, Oracle Corporation, Microsoft Corporation, Amazon Web Services (AWS), Workday Inc., and Honeywell International Inc. continued to support its product offering while strategic industry players like Zebra Technologies Corporation, Terso Solutions Inc., Loftware Inc, Interfaceware Inc, Sales-I Inc and Payroc WorldAccess, Inc extend its offering. Value added reseller and service partners such as Sequoia Group Inc., Avalon Corporate Solutions Corp, OSF Global Services Inc and RiseNow LLC have become active in the Corporation’s customer base, extending its reach as intended.

Industry Verticals

Tecsys’ management believes that its enterprise supply chain platform is well-suited to respond to the changing distribution market. Currently, Tecsys’ business development and sales efforts are focused on vertical markets where the Company has the highest winning opportunity and best financial returns. From research and development and customer services perspectives, this allows Tecsys to replicate its solutions, enabling the Company to reduce costs inherent in new development and adoption of technology. It also helps increase the depth of expertise in these market segments where the Company has developed a reputation as an expert among its customers.

One such industry vertical is built on Tecsys’ decades of expertise and investment into the healthcare industry through pointof-use, distribution and warehouse management solutions. Longstanding customers include major distributors, a number of health systems or Integrated Delivery Networks (IDNs), as well as third-party logistics providers (3PLs) in Canada and the United States. According to the American Hospital Association (AHA)[2] , there are over 6,090 hospitals in the United States.

Today’s healthcare supply chain is complex and costly; it represents the second largest area of expense for hospitals, behind only labor, consuming approximately 40% to 55%[3] of the average operating budget. Unlike retail and other industries where the supply chain is viewed as a strategic asset, the healthcare supply chain has often been underleveraged, even neglected. Most healthcare organizations are managing supplies using outdated information technology systems that cannot communicate with one another. As a result, supply chain processes are largely manual, with staff entering data into various hospital systems as they procure products, manage inventory, capture its use and trigger replenishment needs.

Healthcare has traditionally lagged behind other industries when it comes to supply chain technology investments. The manual labor required among supply chain, operations and clinical staff is inefficient, error prone and expensive. With disjointed systems and data, healthcare organizations have little or no visibility into and control over their supplies. This leads to expired product and significant waste. Further, supply chain disruptions and gaps in supply visibility highlighted by COVID-19 has created greater market awareness of supply chain technology that enables a higher degree of operational responsiveness and agility.

In order for a hospital to transform its supply chain from a major liability into a strategic asset, it must transition from manual to electronic processes. This requires the use of enabling technologies for supply chain automation such as those offered by Tecsys. Technologies enabling standardization, consolidation and integration within a unified platform are a prerequisite to overcome the complexity and challenges.

Another vertical that carries opportunity is the converging retail market. Accelerated by a shift in consumer behavior following COVID-19 restrictions, there is greater demand[4] for e-commerce and order pickup buying options. Currently, many retailers operate siloed online and in-store order management processes, while others are not equipped for e-commerce options entirely. The bifurcation of physical and digital commerce has exposed disconnected retail customer experiences. In order to cope with the growing complexity of order management requirements in a retail environment offering multiple fulfillment

2 https://www.aha.org/statistics/fast-facts-us-hospitals

3 https://rctom.hbs.org/submission/healthcare-where-supply-chain-digitalization-is-life-or-death/

4 https://www.firstinsight.com/press-releases/coronavirus-impacting-shopping-decisions-spending-and-product-availability

options, retailers rely on OMS systems such as that offered by Tecsys. Technologies enabling optimization of complex order fulfillment routes, shipping costs, returns and inventory management equip retailers with a flexible platform for dynamic and scalable omnichannel retail.

The Supply Chain Management Industry

Supply Chain Management (SCM) is a business strategy to improve shareholder and customer value. SCM encompasses the processes of creating and fulfilling the market’s demand for goods and services; it enhances distributor and customer value by optimizing the flow of products, services and related information from suppliers to customers, with a goal of enabling customer satisfaction. Within SCM is Supply Chain Execution (SCE), on which Tecsys has most of its focus, an execution-oriented set of solutions that enable the efficient procurement and supply of goods, services and information to meet customer-specific demand. Businesses deploying SCE solutions are looking to achieve greater visibility into product movements, cost containment and compliance.

Today’s distribution landscape is more sophisticated and volatile than ever; nonetheless, it demands 100% fulfillment with faster service and resiliency. It demands collaboration with customers, suppliers and partners as a borderless enterprise. From unified commerce to the internet of things (IoT), change is reshaping supply chain platforms and they must extend, scale and adapt to the size and needs of business. Competition is fierce, and disintermediation continues to pose a significant threat, giving rise to omnichannel distribution networks and shrinking the margin of error in operations.

Thriving in the current distribution era means adapting internal infrastructure, technology and processes to external challenges. Considering the impact of major disruptions to brick and mortar, the resiliency of multichannel and online retailers, and the strong competition from those who stick to their core competencies means investing in new and innovative technologies. Such disruptions and the accelerated digital environment are pressuring distribution industry leaders to rethink their strategy and take the first step to transform their supply chain or risk being left behind.

Agile companies are quickly outperforming and overtaking their less nimble competitors. A study by The Boston Consulting Group[5] shows that the leaders in digital supply chain management are seeing tremendous benefits:

• Increases in product availability of up to 10%.

• Response times to changes in market demand reduced by at least 25%.

• Realization of working-capital reductions improved by 30%.

• Operating margins 40-110% higher than others, and 17-64% fewer cash conversion days.

McKinsey & Company’s research[6] suggests that, on average, companies that digitize their supply chains can expect to boost annual growth of earnings before interest and taxes by 3.2% and annual revenue growth by 2.3%.

In a 2020 publication[7] , PricewaterhouseCoopers surveyed over 1600 executives from companies across seven industries to investigate the role of digital supply chains in turbulent times. The survey reveals that investments into digital supply chain excellence result in:

• 2x increased revenues and 2x decreased costs as compared to digital novices.

• 84% report >90% on-time in-full delivery performance (compared to 12% of digital novices).

• 53% more inventory turns than digital novices.

• Benefits beyond numbers like risk management, increased asset utilization and improved sustainability.

The publication explains: “For many companies market environments are becoming ever-more challenging. To cope with constant change, companies will need to make sure that their organization is able to continuously evolve and improve. They’ll need a culture of continuous innovation and cross-functional collaboration to get there - always keeping the end-toend value chain in mind. Generally, that means beginning with the needs of the end customer, but also taking into account everything from factories, to warehouses, to backend technologies.”

Material Handling Industry (“MHI”) is the largest material handling, logistics and supply chain association in the U.S. and publisher of the 2021 MHI Annual Industry Report[8] , produced in conjunction with Deloitte Consulting LLP. The report

5 https://on.bcg.com/2wkJDHC

6 McKinsey & Company; Digital transformation: raising supply chain performance to new levels

7 https://www.pwc.com/gx/en/industrial-manufacturing/digital-supply-chain/supply-chain-2025.pdf

8 https://www.mhi.org/publications/report

explores the supply chain vulnerabilities exposed by COVID-19, and the role of digital technologies as a mechanism to be better positioned for supply chain resiliency in an uncertain future. The report expounds on the evolving demand for digital commerce: “The pandemic transformed how people shop, and as stores closed, millions of consumers moved to online shopping (many for the first time).”

The report also highlights the role that technology will play in post-pandemic supply chain organizations: “Companies that embrace digital technologies and innovations can (1) respond more quickly and effectively to the immediate challenges posed by disruption, (2) recover faster than their peers, and (3) create sustainable competitive advantages that enable them to thrive in the post-disruption world.”

In the report’s survey of over 1,000 supply chain and manufacturing leaders, 22% indicate that digital is already the predominant supply chain model, and 83% expect it to become the predominant model in the next 5 years.

In response, leading companies are adopting a more digital approach to business. Using digital innovation to improve supply chain efficiency, transparency and sustainability has become a necessity for continuing to grow the customer base and maintain a competitive standing.

Selected Key Events

During Fiscal 2020, Tecsys enhanced its shift from perpetual license to SaaS bookings. It also announced important functional advancements to its end-to-end retail supply chain platform and omnichannel order fulfillment solution with highlighted new and robust data-driven business intelligence (BI) analytics, an optimized user interface for order management orchestration and an enhanced mobile in-store application for store associates.

On May 6, 2020, Gartner, Inc. released the 2020 Magic Quadrant[9] for Warehouse Management Systems, in which Tecsys was positioned in the “Visionaries” quadrant, a position that it has held since its first inclusion in 2010. Gartner Magic Quadrant research methodology provides a graphical competitive positioning of four types of technology providers in fast-growing markets: Leaders, Visionaries, Niche Players and Challengers. Gartner has evaluated global WMS vendors based on their completeness of vision and ability to execute and has recognized 15 WMS suppliers that were included in the 2020 Magic Quadrant for Warehouse Management Systems, one of which is Tecsys.

On April 28, 2020, Tecsys completed an offering of 1,333,333 common shares of the Company including 173,913 common shares issued as a result of the exercise in full by the underwriters of their over-allotment option (the “Offered Shares”) at a price of $17.25 per share, for aggregate gross proceeds of $22,999,994 (the “2020 Offering”). The 2020 Offering was completed on a bought deal basis and was underwritten by a syndicate of underwriters co-led by Stifel Nicolaus Canada Inc. and Cormark Securities Inc. which included Laurentian Bank Securities Inc. and Echelon Wealth Partners Inc.

On September 10, 2020, two nominees to Tecsys’ board were elected by shareholders at Tecsys’ annual and special shareholders meeting - SaaS technology marketing executive Rani Hublou and financial strategist Kathleen Miller. These nominees expanded the existing Board.

On February 12, 2021, Tecsys announced the appointment of Martin Schryburt to the position of vice president, Research and Development. Bringing over 25 years’ experience in software development, Mr. Schryburt is a global R&D business leader brought in to guide overall product strategy and spearhead product development from architecture to delivery.

Description of Business Model

The Company has five principal sources of revenue:

• software as a service (SaaS) subscriptions which represent the right to access our software platform in a hosted and managed environment for a period of time;

• maintenance and support services, including hosting services sold with perpetual licenses and hardware maintenance services;

• professional services, including implementation consulting and training services provided to customers;

• software licenses;

• hardware.

Starting in 2019, the Company shifted its business model and began selling its solutions primarily on a SaaS subscription basis. As such, Tecsys expects SaaS revenue to continue to grow over time. Revenue from maintenance and support services

9 Gartner, “Magic Quadrant for Warehouse Management Systems” by C. Dwight Klappich & Simon Tunstall,

relate in a large part to our prior business model of selling perpetual licenses with attached maintenance and support fees. The Company expects maintenance and support services revenue to generally decline over time as new customers acquire SaaS subscriptions and existing customers eventually migrate to SaaS.

In the three and twelve months ended April 30, 2021, Tecsys generated $32.4 million and $123.1 million in total revenue, respectively. The revenue mix for the three months ended April 30, 2021 was: SaaS 15%; maintenance and support 27%; professional services 39%; license 4%; and hardware 16%. The revenue mix for the twelve months ended April 30, 2021 was: SaaS 15%; maintenance and support 28%; professional services 39%; license 4%; and hardware 14%.

SaaS and maintenance and support services revenue are reported together under Cloud, maintenance and subscription revenue. This revenue is generally recurring in nature. Annual Recurring Revenue (“ARR”) is defined as the contractually committed purchase of cloud, maintenance and subscription services over the next twelve months. The quantification assumes that the customer will renew the contractual commitments on a periodic basis as they come up for renewal. This portion of the Company’s revenue is predictable and stable, and the Company has reasonable assurance that it will occur at regular intervals with a high degree of certainty. At the end of fiscal 2021, Tecsys’ ARR[10] amounted to $52.5 million, up 9% from the end of prior fiscal year (up 18% on a constant currency basis using year end 2021 currency rates).

Professional services revenue includes both the fees associated with implementation assistance and ongoing services. These ongoing services include consulting, training, product adaptations and upgrade implementation assistance. Such revenue is typically derived from contracts based on a fixed-price or time-and-material basis and is recognized as the services are performed.

Cost of revenue comprises the cost of products purchased for re-sale and the cost of services.

Cost of products includes the cost of proprietary hardware technology and all third-party products purchased for re-sale and required to complete customer solutions and internal production and coordination costs related to the delivery of proprietary hardware technology and third-party equipment. The third-party products purchased for re-sale are typically other software products such as database and business intelligence software and hardware such as radio frequency equipment, storage equipment, and computer servers.

Cost of services includes mainly salaries, incentives, benefits and travel expenses of all personnel providing services as well as third party cloud infrastructure costs associated with delivering SaaS and hosting services. Also included in the cost of services is a portion of overhead and e-business tax credits available under a Quebec government incentive program designed to support the development of the information technology industry.

Sales and marketing as well as general and administration expenses include all personnel costs involved in these functions. They also include all other costs related to sales and marketing and general and administration, such as travel, rent, advertising, trade shows, professional fees, office expenses, training, telecommunications, bad debts, stock-based compensation, acquisition costs, equipment rentals and maintenance costs and overhead.

Research and development (R&D) includes salaries, benefits, incentives and expenses of all staff assigned to R&D. Fees paid to external consultants and sub-contractors are also included, along with a portion of overhead partially offset by research and development tax credits as well as e-business tax credits.

At the end of fiscal 2021, the Company employed 655 employees, up 27% in comparison to 514 at the end of fiscal 2020.

The average number of employees was 582 in fiscal 2021 in comparison to 481 for fiscal 2020.

Key Performance Indicators

The Company uses certain key performance indicators in its MD&A and other communications which are described in the following section. These key performance indicators are unlikely to be comparable to similarly titled indicators reported by other companies. Readers are cautioned that the disclosure of these metrics are meant to add to, and not to replace, the discussion of financial results determined in accordance with IFRS. Management uses both IFRS measures and key performance indicators when planning, monitoring and evaluating the Company’s performance.

Recurring Revenue

Recurring revenue (also referred to as Annual Recurring Revenue) is defined as the contractually committed purchase of SaaS, proprietary software maintenance, customer support, application hosting, database administration services and third-party maintenance services, over the next twelve months. The quantification assumes that the customer will renew the contractual commitment on a periodic basis as they come up for renewal. This portion of the Company’s revenue is predictable and stable.

10 Refer to section at end of MD&A titled “Key Performance Indicators”

Bookings

Broadly speaking, bookings refers to the total value of accepted contracts. Acknowledging the business shift to SaaS and in order to provide greater clarity around expected timing of future revenue, in fiscal 2020 the Company began reporting bookings on a disaggregated basis. This includes SaaS ARR bookings (the average annual value of committed SaaS recurring revenue at the time of contract signing), professional services bookings and perpetual license bookings. The Company believes that these metrics are primary indicators of business performance. The Company no longer reports combined total contract value bookings.

Backlog

Backlog in general refers to the value of contracted revenue that is not yet recognized. With the Company’s shift to SaaS, our backlog reporting has focused on (a) the natural backlog that is created by Annual Recurring Revenue (annual recurring revenue assuming the customer will renew the contractual commitment on a periodic basis as those commitments come up for renewal) and (b) Professional Services Backlog. The Company also focuses on contracted SaaS backlog as a key performance indicator. The Company enters into SaaS subscription agreements that are typically multi-year performance obligations with original contract terms of three to five years. Contracted SaaS backlog represents revenue that we expect to recognize in the future related to firm performance obligations that are unsatisfied (or partially unsatisfied) at the reporting date.

Days Sales Outstanding (DSO)

Days sales outstanding (DSO) is a measure of the average number of days that a company takes to collect revenue after a sale has been made. The Company’s DSO is determined on a quarterly basis and can be calculated by dividing the amount of accounts receivable and work in progress at the end of a quarter by the total value of sales during the same quarter, and multiplying the result by 90 days.

Selected Annual Information

In thousands of Canadian dollars, except per share data

Selected Annual Information In thousands of Canadian dollars, except per share data
	2021	2020	2019
Total revenue	123,101	104,855	76,449
Net proft/(loss)	7,188	2,346	(741)
Comprehensive income (loss)	6,998	2,969	(835)
Adjusted EBITDA11	16,220	10,271	2,776
Basic earnings (loss) per common share	0.50	0.18	(0.06)
Diluted earnings (loss) per common share	0.49	0.18	(0.06)
Common share dividends	0.25	0.23	0.21
Total assets	129,309	124,433	85,445
Cash and cash equivalents and short-term investments	45,852	37,528	14,913
Long-term debt (including the current portion)	9,616	10,831	11,849

In fiscal 2021, total revenue increased by $18.2 million, or 17%, lead by growth in SaaS and professional services. Higher margin contribution combined with operating cost leverage resulted in increased net profit and Adjusted EBITDA. The growth rate in fiscal 2021 is organic, as fiscal 2020 included a full year of results from prior acquisitions.

In fiscal 2020, total revenue increased by $28.4 million. The acquisitions of OrderDynamics and Tecsys A/S contributed $18.8 million while the organic business contributed $9.6 million. The Company recorded $1.0 million of stock-based compensation expense and $0.4 million of restructuring costs related to acquisition and integration (primarily severance), which had a negative impact on profit and no impact on Adjusted EBITDA as these items are excluded from Adjusted EBITDA. The implementation of International Financial Reporting Standard No. 16 - Leases had an insignificant impact on profit and positively impacted adjusted EBITDA by $1.3 million. The Company recorded a $0.2 million cost for the fair value of contingent consideration to be paid for Tecsys A/S. This change in the fair value of the contingent consideration resulted from a strong financial performance of Tecsys A/S that increased contingent consideration to be paid to the sellers (“Earnout”). The Earnout period ended on September 30, 2019 and is the only Earnout period associated with the acquisition. This had a negative impact on Profit and no impact on Adjusted EBITDA.

Compared to the twelve-month period ended April 30, 2019 (“fiscal 2019”), Profit and Adjusted EBITDA in fiscal 2020 was positively impacted by $0.8 million and $2.3 million, respectively, from Tecsys A/S contribution (acquisition closed in February 2019). Profit and Adjusted EBITDA in fiscal 2020 was also positively impacted by $0.4 million and $1.3 million, respectively, of yearly sequential improvement from OrderDynamics (acquisition closed in November 2018).

Non-IFRS Performance Measures

The Company uses certain non-IFRS financial performance measures in its MD&A and other communications which is described in the following section. The non-IFRS measures do not have any standardized meaning prescribed by IFRS and are unlikely to be comparable to similarly titled measures reported by other companies. Readers are cautioned that the disclosure of these metrics is meant to add to, and not to replace, the discussion of financial results determined in accordance with IFRS. Management uses both IFRS and non-IFRS measures when planning, monitoring and evaluating the Company’s performance.

11 Refer to section at end of MD&A titled “Non-IFRS Performance Measures”

EBITDA and Adjusted EBITDA

The terms and definitions of the non-GAAP measure used in this MD&A and a reconciliation of the non-GAAP measure to the most directly comparable GAAP measure are provided below. These non-GAAP measures do not have any standardized meanings prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Accordingly, they should not be considered in isolation.

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, fiscal 2020 and fiscal 2019 derived from IFRS measures in the

Company’s Consolidated financial statements, is as follows (in thousands of Canadian dollars):

		2021		2020		2019
Net proft (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

The Company adopted IFRS 16 – Leases, using the modified retrospective approach, effective for fiscal 2020, beginning on May 1, 2019. Accordingly, comparative figures for fiscal 2019 have not been restated and continue to be reported under IAS 17. As a result, EBITDA and adjusted EBITDA includes adjustments for additional depreciation related to the right-of-use assets of $1.0 million and interest expense on lease liabilities of $0.4 million for each of the years ended April 30, 2021 and 2020.

Results of Operations

Year ended April 30, 2021 compared to year ended April 30, 2020

Revenue

Total revenue for fiscal 2021 increased to $123.1 million, $18.2 million or 17% higher, compared to $104.9 million for fiscal 2020. Approximately 63% of the Company’s revenues were generated in U.S. dollars during fiscal 2021 compared to 58% in fiscal 2020. The U.S. dollar averaged CA$1.3086 in fiscal 2021 compared to CA$1.3362 in fiscal 2020. In comparison to fiscal 2020, the Company’s partial hedging of U.S revenue more than offset the decline in the value of the U.S. dollar giving rise to

a net favorable foreign currency related revenue variance of $0.4 million. Lower travel in fiscal 2021 due to COVID-19 gave rise to an unfavorable reimbursable expense revenue variance of $1.8 million compared to fiscal 2020.

Cloud, maintenance and subscription revenue increased to $52.9 million, up $11.8 million or 29%, in fiscal 2021 in comparison to $41.1 million for fiscal 2020. The increase is primarily driven by SaaS. SaaS Revenue in fiscal 2021 was $19.2 million, up 113% compared to $9.0 million in fiscal 2020.

In fiscal 2021, SaaS subscription bookings[12] (measured on an ARR basis) were $9.5 million, up 9% compared to $8.8 million in 2020. At April 30, 2021, SaaS backlog[12] was $65.7 million, up 26% from $52.0 million at April 30, 2020. Total ARR at April 30, 2021 was $52.5 million, up 9% compared to $48.1 million at April 30, 2020. A significant amount of SaaS backlog and ARR is denominated in currencies other than Canadian Dollars. As a result, movements in exchange rates will have an impact on SaaS backlog and ARR reported in Canadian Dollars. During fiscal 2021, exchange movements (primarily the weakening U.S. Dollar) had a $4.7 million negative impact on SaaS backlog and a $3.9 million negative impact on ARR.

Professional services revenue increased to $47.4 million, up $6.8 million or 17%, in fiscal 2021 in comparison to $40.6 million for fiscal 2020. Professional Services bookings in fiscal 2021 were $44.8 million, down 12% compared to $50.7 million in fiscal 2020. Fiscal 2021 bookings were negatively impacted by the timing of signature on a large professional services order associated with a fourth quarter SaaS deal. The SaaS order was signed in the fourth quarter of fiscal 2021, but the professional services order was signed in the first quarter of fiscal 2022. Fiscal 2020 bookings were positively impacted by a large multi-year professional services order associated with a fourth quarter SaaS deal.

Proprietary products revenue, defined as internally developed products including proprietary software and hardware technology products, amounted to $5.2 million in fiscal 2021, down $0.2 million or 3% compared to fiscal 2020. Perpetual license bookings in fiscal 2021 were $4.3 million compared to $4.7 million in fiscal 2020. Management expects that license bookings will be generally lower in the future as the shift to SaaS continues.

Third party products revenue increased to $17.5 million, $1.6 million or 10% higher in fiscal 2021 in comparison to $15.9 million for the same period last year.

Cost of Revenue

Total cost of revenue increased to $62.5 million, up $7.9 million or 15%, in fiscal 2021, in comparison to $54.5 million for fiscal 2020. The increase is primarily attributable to higher services costs of $8.1 million and higher product costs of $1.6 million, partially offset by lower reimbursable expenses of $1.8 million.

The cost of products increased to $14.4 million in fiscal 2021, up $1.6 million compared to fiscal 2020 and driven by higher

third-party product costs associated with higher revenue.

The cost of services increased to $48.0 million, up $8.1 million or 20%, in fiscal 2021 in comparison to $39.8 million for the same period last year. Cost of services increased primarily as a result of direct costs associated with higher revenue, including higher employee and SaaS infrastructure costs. The cost of services includes tax credits of $2.5 million for fiscal 2021 compared to $1.6 million for fiscal 2020.

Gross Profit

Gross profit increased to $60.6 million, up $10.3 million or 20%, in fiscal 2021 in comparison to $50.3 million for the same period last year. This is mainly attributable to higher services margin of $10.5 million, partially offset by lower product margin of $0.2 million. Total gross margin was 49% in fiscal 2021 compared to 48% in fiscal 2020.

Services gross profit during fiscal 2021 increased by $10.5 million to $52.3 million in comparison to $41.8 million for the

same period last year. Services gross margin was 52% in fiscal 2021 compared to 51% in fiscal 2020.

The products margin in fiscal 2021 decreased by $0.2 million to $8.3 million compared to $8.5 million in the same period last year. Product margin was down from 40% in fiscal 2020 to 37% in fiscal 2021 due to a higher mix of third-party products revenue.

12 Refer to section at end of MD&A titled “Key Performance Indicators”

Operating Expenses

Total operating expenses for fiscal 2021 increased to $49.9 million, higher by $4.3 million or 10%, compared to $45.6 million for the same period last year. The weaker U.S. dollar impacted costs of sales and operating expenses favorably by approximately $0.6 million in fiscal 2021 compared to fiscal 2020. The most notable differences between fiscal 2021 in comparison to fiscal 2020 are as follows:

• Sales and marketing expenses amounted to $21.0 million, $0.9 million higher than the previous fiscal year. The increase is attributed to higher personnel costs of $2.4 million, partially offset by $1.5 million of lower travel costs due to the COVID-19 pandemic.

• General and administrative expenses were $10.4 million, $0.6 million higher than the previous fiscal year. The Company incurred $0.7 million of higher personnel costs and professional fees partially offset by $0.2 million of lower travel costs due to COVID-19.

• Net R&D expenses amounted to $18.6 million in fiscal 2021, up $3.3 million from the previous fiscal year. The increase was primarily the result of $3.5 million of higher personnel costs, consulting fees and infrastructure costs, partially offset by $0.3 million of lower travel costs. The Company recorded $2.2 million of R&D tax credits and e-business tax credits in fiscal 2021 in comparison to $2.0 million for the previous fiscal year. The Company amortized deferred development costs and other intangible assets of $0.3 million in fiscal 2021 in comparison to $0.6 million in fiscal 2020. Additionally, the Company deferred $0.3 million of development costs in fiscal 2021 in comparison to $0.6 million in fiscal 2020.

• Restructuring costs were $nil, compared to $0.4 million in fiscal 2020. These prior year costs were related to acquisition and integration costs, primarily for severance.

Profit from Operations

The Company recorded profit from operations of $10.7 million in fiscal 2021, an increase of 127% in comparison to a profit from operations of $4.7 million in fiscal 2020. Contributing to the increase in profit is higher professional services and cloud, maintenance and subscription margin, lower restructuring costs and lower travel costs due to the COVID-19 pandemic partially offset by higher personnel costs.

Net Finance Costs

In fiscal 2021, the Company recorded $0.3 million of net finance costs in comparison to $1.1 million in net finance costs for the prior fiscal year. Net finance costs in fiscal 2021 consisted of interest expense on long-term debt and lease obligations partially offset by foreign exchange gains and interest income.

Income Taxes

In fiscal 2021, the Company recorded income tax expense of $3.2 million comprised of current income tax expense of $2.3 million and deferred income tax expense of $0.9 million. In fiscal 2020, the Company recorded an income tax expense of $1.2 million comprised of current income tax expense of $2.1 million and deferred income tax benefit of $0.8 million. The increase in current income tax expense as compared to fiscal 2020 is due to the increase in profitability as compared to the prior fiscal year, offset by the use of tax attributes in fiscal 2021 to decrease taxable income. The increase in deferred income tax expense in fiscal 2021 is mainly due to the use of tax attributes to decrease taxable income. In fiscal 2020 the Company recorded a deferred income tax benefit due to the recognition of previously unrecognized deferred tax assets.

As at April 30, 2021, the Company had recognized deferred tax assets of $6.0 million and has an unrecognized net deferred tax asset of $4.8 million covering various jurisdictions and approximately $4.9 million of Canadian federal non- refundable SRED tax credits which may be used only to reduce future Canadian federal income taxes otherwise payable. As such, the Company does not anticipate any significant cash disbursements related to Canadian federal income taxes in the medium term given its availability of Canadian federal non-refundable tax credits and deferred tax assets. Refer to note 16 of the consolidated financial statements for further details.

Net Profit

The Company realized a profit of $7.2 million fiscal 2021 compared to a profit of $2.3 million in fiscal 2020. Basic and fully diluted earnings per share in fiscal 2021 were $0.50 and $0.49 per share, respectively, compared to $0.18 per share (basic and fully diluted) for fiscal 2020.

Results of Operations for the Fourth Quarter Quarter ended April 30, 2021 compared to quarter ended April 30, 2020

Revenue

Total revenue for the fourth quarter ended April 30, 2021 increased to $32.4 million, $4.6 million or 17% higher, compared to $27.7 million for the same period of fiscal 2020. Approximately 65% (2020 – 64%) of the Company’s revenues were generated in U.S. dollars during the fourth quarter of fiscal 2021. The U.S. dollar averaged CA$1.2588 in the fourth quarter of fiscal 2021 in comparison to CA$1.3765 in the fourth quarter of fiscal 2020. The weaker U.S dollar, partially offset by the Company’s hedging of U.S revenue, gave rise to a net unfavorable foreign currency related revenue variance of $1.3 million in the fourth quarter of fiscal 2021 compared to the same quarter last year. Lower travel in the fourth quarter of fiscal 2021 due to COVID-19 gave rise to an unfavorable reimbursable expense revenue variance of $0.3 million compared to the same period of fiscal 2020.

Cloud, maintenance and subscription revenue increased to $13.8 million, up $3.2 million or 30%, in the fourth quarter of fiscal 2021 in comparison to $10.6 million for the same period last year. The increase is primarily driven by SaaS. The increase in SaaS revenue was driven by new SaaS revenue from bookings in recent quarters. SaaS revenue in the fourth quarter of fiscal 2021 was $5.5 million, up 107% or over $2.8 million compared to the fourth quarter of fiscal 2020 and up $0.8 million sequentially compared to the third quarter of fiscal 2021.

In the fourth quarter of fiscal 2021, SaaS subscription bookings (measured on an ARR basis) were $3.5 million, down 14% compared to $4.1 million in the fourth quarter of fiscal 2020. At April 30, 2021, SaaS backlog was $65.7 million, up 26% from $52.0 million at April 30, 2020 and up $8.1 million or 14% sequentially compared to January 31, 2021. Total Annual Recurring Revenue (ARR) at April 30, 2021 is $52.5 million, up 9% compared to $48.1 million at April 30, 2020 and up $1.7 million from $50.8 million at January 31, 2021. As noted previously, a significant amount of SaaS backlog and ARR is denominated in currencies other than Canadian Dollars. As a result, movements in exchange rates will have an impact on SaaS backlog and ARR reported in Canadian Dollars. During the fourth quarter of fiscal 2021, exchange movements (primarily the weakening U.S. Dollar) had a $1.3 million negative impact on SaaS backlog and a $1.5 million negative impact on ARR.

Professional services revenue increased to $12.1 million, up $1.3 million or 12%, in the fourth quarter of fiscal 2021 in comparison to $10.8 million for the same period last year. Professional Services bookings in the fourth quarter of fiscal 2021 were $8.7 million, down 58% compared to $20.7 million in the fourth quarter of fiscal 2020. Professional Services bookings are in part linked to SaaS subscription bookings and license bookings and are subject to timing. See also comments above under Results of Operations for the year ended April 30, 2021 compared to year ended April 30, 2020

Proprietary products revenue, defined as internally developed products including proprietary software and hardware technology products, amounted to $1.3 million in the fourth quarter of fiscal 2021, down $0.4 million or 21% compared to the same period last year. Perpetual license bookings in the fourth quarter of fiscal 2021 were $0.8 million compared to $1.4 million in the fourth quarter of fiscal 2020.

Third party products revenue increased to $5.0 million, $0.8 million or 19% higher in comparison to $4.2 million for the same period last year.

Cost of Revenue

Total cost of revenue increased to $16.7 million, up $1.8 million or 12%, in the fourth quarter of fiscal 2021, in comparison to $14.9 million for the same period in fiscal 2020. The increase is primarily attributable to higher services costs of $1.5 million and higher product costs of $0.6 million, partially offset by lower reimbursable expenses of $0.3 million.

The cost of products increased to $4.1 million in the fourth quarter of fiscal 2021, up $0.6 million in comparison to the same period in fiscal 2020. The increase was driven by increased costs related to the sale of third-party products, primarily hardware.

The cost of services increased to $12.5 million, up $1.5 million or 14%, in the fourth quarter of fiscal 2021 in comparison to $11.0 million for the same period last year. Cost of services increased primarily as a result of direct costs associated with

higher revenue, including higher employee and SaaS infrastructure costs. The cost of services includes tax credits of $0.6 million for the fourth quarter of fiscal 2021 compared to $0.4 million for the fourth quarter of fiscal 2020.

Gross Profit

Gross profit increased to $15.7 million, up $2.8 million or 22%, in the fourth quarter of fiscal 2021 in comparison to $12.9 million for the same period last year. This is mainly attributable to higher service margin of $3.0 million and lower product margin of $0.1 million. Total gross margin was 49% for the fourth quarter of fiscal 2021 compared to 46% in the same period of fiscal 2020.

Services gross profit during the fourth quarter of fiscal 2021 increased by $3.0 million to $13.4 million in comparison to $10.5 million for the same period last year. Services gross margin was 52% in the fourth quarter of fiscal 2021 in comparison to 49% for the same period last year.

Products gross profit decreased by $0.1 million in the fourth quarter of fiscal 2021 compared to the same period last year. Product gross margin was 36% in the fourth quarter of fiscal 2021 compared to 41% for the same period last year. The decline is primarily due to a lower mix of license and a higher mix of third-party hardware in the fourth quarter of fiscal 2021.

Operating Expenses

Total operating expenses for the fourth quarter of fiscal 2021 increased to $13.1 million, higher by $0.8 million or 6%, compared to $12.3 million for the same period last year.

The weaker U.S dollar gave rise to a favorable impact of $0.6 million in the fourth quarter of fiscal 2021 compared to the same period last year.

The most notable differences between the fourth quarter of fiscal 2021 in comparison with the same period in fiscal 2020 are as follows:

• Sales and marketing expenses amounted to $5.6 million, $0.3 million higher than the comparable quarter last year. The increase is mainly attributed to higher personnel costs and commission costs, partially offset by lower travel costs due to the COVID-19 pandemic and lower marketing program costs. Management expects sales and marketing expense to continue to increase in the near term.

• General and administrative expenses were $2.4 million, $0.2 million lower compared to the same quarter last year. Allowance for expected credit losses declined by $0.2 million compared to the same quarter last year.

• Net R&D expenses amounted to $5.0 million in the fourth quarter of fiscal 2021, up $0.7 million from the same quarter last year. The increase was primarily the result of higher personnel costs and consulting costs, partially offset by lower travel costs. The Company recorded $0.6 million of R&D tax credits and e-business tax credits in the fourth quarter of fiscal 2021 in comparison to $0.5 million for the same period in fiscal 2020. The Company amortized deferred development costs and other intangible assets of $0.1 million in both the fourth quarter of fiscal 2021 and fiscal 2020. Additionally, the Company deferred $0.1 million of development costs in the fourth quarter of fiscal 2021 and in fiscal 2020. Management expects R&D expenses to continue to increase in the near term.

Profit from Operations

The Company recorded profit from operations of $2.6 million in the fourth quarter of fiscal 2021, an increase of $2.0 million or 343% compared to the same period in fiscal 2020. Contributing to the increase in profit is higher professional services and cloud, maintenance and subscription gross profit and lower travel costs due to the COVID-19 pandemic, partially offset by lower products margin, higher R&D costs and higher sales and marketing costs.

Net Finance Costs

In the fourth quarter of fiscal 2021, the Company recorded $0.1 million of net finance costs which remained flat in comparison to the same quarter last year. For the fourth quarter of fiscal 2021, net finance costs consisted primarily of interest expense on long-term debt and lease obligations partially offset by interest income.

Income Taxes

In the fourth quarter of fiscal 2021, the Company recorded an income tax expense of $0.5 million in comparison to $0.1 million in the fourth quarter of fiscal 2020. The increase in income tax expense as compared to the same period in fiscal 2020 is due primarily to higher profitability in the fourth quarter of fiscal 2021, as well as lower tax expense in fiscal 2020 due to the recognition of previously unrecognized deferred tax assets.

Net Profit

The Company realized a profit of $2.0 million or $0.14 per share (basic and fully diluted) in the fourth quarter of fiscal 2021 compared to a profit of $0.4 million or $0.03 per share (basic and fully diluted) for the same period in fiscal 2020

Quarterly Selected Financial Data

(Quarterly data are unaudited)

In thousands of Canadian dollars, except per share data

Fiscal year 2021	Q1	Q2	Q3	Q4	Total
Total revenue	28,091	30,694	31,942	32,374	123,101
Net proft	1,235	2,086	1,847	2,020	7,188
Comprehensive income	2,897	1,486	1,527	1,088	6,998
Adjusted EBITDA	3,509	4,830	3,964	3,917	16,220
Basic earnings per common share	0.09	0.14	0.13	0.14	0.50
Diluted earnings per common share	0.08	0.14	0.12	0.14	0.49
Fiscal year 2020	Q1	Q2	Q3	Q4	Total
Total revenue	24,250	26,008	26,847	27,750	104,855
Net proft (loss)	(267)	1,404	834	375	2,346
Comprehensive income (loss)	(488)	1,439	818	1,200	2,969
Adjusted EBITDA	1,995	3,677	2,648	1,951	10,271
Basic and diluted earnings (loss) per common share	(0.02)	0.11	0.06	0.03	0.18

In the fourth quarter of fiscal 2021, Profit and Adjusted EBITDA were generally in line with the third quarter of fiscal 2021.

In the third quarter of fiscal 2021, Profit and Adjusted EBITDA were negatively impacted by $0.5 million of lower products margin compared to the second quarter of fiscal 2021, primarily due to lower perpetual license revenue. Profit and Adjusted EBITDA were negatively impacted by $0.2 million of higher operating expenses compared to the second quarter of fiscal 2021 mainly due to higher R&D consulting costs and higher personnel costs associated with higher headcount, partially offset by lower bonus costs. Profit was positively impacted by $0.6 million from lower income tax expense recognized in the third quarter of fiscal 2021 compared to the second quarter of fiscal 2021 due to lower pre-tax profit and a lower consolidated effective tax rate in the third quarter of fiscal 2021.

In the second quarter of fiscal 2021, Profit and Adjusted EBITDA were positively impacted by $2.5 million from higher profit margin mainly due to higher revenue compared to the first quarter of fiscal 2021. Profit and Adjusted EBITDA were negatively impacted by $1.0 million related to higher personnel costs (bonus and commissions). Profit was negatively impacted by $0.5 million due to income tax expense recognized in the second quarter of fiscal 2021 compared to the first quarter of fiscal 2021.

In the first quarter of fiscal 2021, Profit and Adjusted EBITDA were positively impacted by $0.8 million resulting from lower operating expenses compared to the fourth quarter of fiscal 2020, mainly due to lower travel costs associated with COVID-19 and lower personnel costs (mainly bonus and commissions). Profit and Adjusted EBITDA was also positively impacted by $0.6 million resulting from higher profit margin mainly due higher revenue, lower travel costs and lower bonus costs compared to the fourth quarter of fiscal 2020. Profit and Adjusted EBITDA was also positively impacted by $0.1 million due to foreign exchange gains and losses compared to the fourth quarter of fiscal 2020. Profit was negatively impacted by $0.7 million due to income tax expense recognized in the first quarter of fiscal 2021 compared to the fourth quarter of fiscal 2020.

In the fourth quarter of fiscal 2020, Adjusted EBITDA was positively impacted by $0.4 million resulting from the implementation of International Financial Reporting Standard No. 16 – “Leases”. See further discussion under New Accounting Standards adopted during the year in the consolidated financial statements for the year ended April 30, 2020.

In the third quarter of fiscal 2020, Adjusted EBITDA was positively impacted by $0.3 million resulting from the implementation of International Financial Reporting Standard No. 16 - “Leases”. See further discussion under New Accounting Standards adopted during the year in the consolidated financial statements for the year ended April 30, 2020.

In the second quarter of fiscal 2020, the Company recorded a $0.2 million cost for the fair value of contingent consideration to be paid for Tecsys A/S. This change in the fair value of the contingent consideration resulted from strong financial performance of Tecsys A/S that increased contingent consideration expected to be paid to the sellers (the Earnout). The Earnout period ended on September 30, 2019 and is the only Earnout period associated with the acquisition. The above amount had a negative impact on Profit and no impact on Adjusted EBITDA as this item is excluded from Adjusted EBITDA. Adjusted EBITDA was positively impacted by a quarterly sequential improvement from OrderDynamics, which achieved slightly positive Adjusted EBITDA in the second quarter of fiscal 2020. Adjusted EBITDA was also positively impacted by $0.3 million resulting from the implementation of International Financial Reporting Standard No. 16 - “Leases”. See further discussion under New Accounting Standards adopted during the year in the consolidated financial statements for the year ended April 30, 2020.

In the first quarter of fiscal 2020, the Company recorded $0.4 million of restructuring costs related to acquisition integration (primarily severance). This had a negative impact on Profit and no impact on Adjusted EBITDA as this item is excluded from Adjusted EBITDA. Adjusted EBITDA was positively impacted by $0.3 million resulting from the implementation of International Financial Reporting Standard No. 16 - “Leases”. See further discussion under New Accounting Standards adopted during the year in the consolidated financial statements for the year ended April 30, 2020.

Liquidity and Capital Resources

On April 30, 2021, current assets totaled $75.8 million compared to $67.0 million at the end of fiscal 2020. This $8.8 million increase was driven by cash and cash equivalents combined with short-term investments which increased to $45.9 million from $37.5 million at the end of fiscal 2020.

Accounts receivable and work in progress totaled $17.0 million on April 30, 2021 compared to $19.3 million as at April 30, 2020. The decrease in accounts receivable and work in progress was impacted by strong cash collections during fiscal 2021 and was also influenced by the foreign exchange impact on U.S. dollar receivables. The closing rate for the U.S dollar decreased 13% from CA$ 1.3877 as at April 30, 2020 to CA$ 1.2292 as at April 30, 2021.

The Company’s DSO[13] (days sales outstanding) was 47 days at the end of fiscal 2021 compared to 63 at the end of fiscal 2020.

Current liabilities on April 30, 2021 increased to $44.0 million compared to $42.9 million at the end of fiscal 2020 mainly due to an increase in deferred revenue from SaaS, partially offset by a decrease in other current liabilities associated with the payment of acquisition related holdbacks and acquired tax liabilities. Working capital (current assets less current liabilities)

13 Refer to section at end of MD&A titled “Key Performance Indicators”

increased to $31.8 million as of April 30, 2021 in comparison to $24.1 million at the end of fiscal 2020. The increase is primarily due to an increase in combined cash and cash equivalents and short-term investments and decrease in other liabilities, partially offset by higher deferred revenue and lower accounts receivable.

The Company believes that funds on hand at April 30, 2021 combined with cash flow from operations and its accessibility to banking facilities will be sufficient to meet its covenants and its needs for working capital, R&D, capital expenditures, and dividends for at least the next twelve months.

Cash from Operations

Operating activities generated $19.1 million of cash in fiscal 2021 in comparison to $10.0 million in fiscal 2020. Operating activities excluding changes in non-cash working capital items related to operations generated $12.8 million in fiscal 2021 and $7.3 million in fiscal 2020. The increase is primarily due to higher profitability compared to fiscal 2020.

Non-cash working capital items generated funds of $6.3 million in fiscal 2021 primarily due to a decreases in accounts receivable of $1.6 million, work in progress of $0.7 million, other receivables of $0.3 million and increases in deferred revenue of $5.9 million, partially offset by an increase in tax credits of $0.7 million, and increases in prepaid expenses and contract acquisition costs of $1.5 million.

Non-cash working capital items generated funds of $2.7 million in fiscal 2020 primarily due to increases in accounts receivable of $3.4 million, other receivables of $0.3 million and prepaid expenses and contract acquisition costs of $2.9 million, offset by increases in accounts payable and accrued liabilities of $7.3 million and deferred revenue of $1.9 million.

Financing Activities

Cash flows used in financing activities amounted to $7.1 million for fiscal 2021 in comparison to $15.9 million of cash flows generated from financing activities for fiscal 2020.

During fiscal 2021, financing activities related primarily to payments related to acquired tax liability, dividends, interest, lease obligations and long-term debt partially offset by proceeds from issuance of common shares from the exercise of stock options. During fiscal 2020, financing activities related primarily to proceeds from issuance of common shares, partially offset by payments related to dividends, interests, lease obligations and long-term debt.

In fiscal 2021, the Company paid $2.2 million to the Canada Revenue Agency relating to the acquired tax liability, which was part of the total consideration to acquire OrderDynamics. Refer to note 4 of the April 30, 2020 Annual Consolidated Financial Statements regarding the acquisition of OrderDynamics.

During fiscal 2021, the Company repaid $1.2 million of the long-term debt compared to $1.0 million for fiscal 2020.

During fiscal 2021, the Company declared quarterly dividends of $0.06 per share for the first two quarters and $0.065 per share for each of the following quarters for an aggregate of $3.6 million. During fiscal 2020, the Company declared quarterly dividends of $0.055 per share for the first two quarters and $0.06 per share for each of the following quarters for an aggregate of $3.0 million.

On April 28, 2020 (during fiscal 2020), the Company completed an offering of 1,333,333 common shares of the Company at the offering price of $17.25 per common share for aggregate gross proceeds of $23.0 million (the “Offering”). The Offering included a treasury offering of 1,159,420 shares by the Company and 173,913 common shares purchased by the underwriters pursuant to the exercise of their over-allotment option on April 28, 2020. The Offering was completed on a bought deal basis and was underwritten by a syndicate of underwriters. The common shares were offered by way of a short form prospectus filed in all provinces in Canada. Transaction costs directly associated with this issuance of treasury shares of approximately $1.7 million ($1.3 million net of taxes) have been recognized as a reduction of the proceeds, resulting in net total proceeds of $21.7 million.

Investing Activities

During fiscal 2021, investing activities used funds of $13.8 million in comparison to $13.2 million for fiscal 2020.

On May 1, 2020, the Company invested $10.0 million of the Offering proceeds in a guaranteed investment certificate (“GIC”). The GIC has a 31-day withdrawal notice requirement and the interest is automatically reinvested monthly. On April 28, 2020 (during fiscal 2020), the Company invested $10.0 million of the Offering proceeds in a GIC. The GIC is renewable at maturity.

During the third quarter of fiscal 2021, the Company paid $1.5 million of indemnification security (‘’Indemnification Holdback’’), which was part of the total consideration to acquire OrderDynamics. At April 30, 2021, there is $0.5 million of remaining Indemnification Holdback. During the fourth quarter of fiscal 2021, the Company paid $0.7 million for the second and last instalment of Tecsys A/S Indemnification Holdback. During fiscal 2020, the Company paid $1.1 million related to the contingent payable earnout of Tecsys A/S. In fiscal 2020, the Company also paid $0.6 million for the first instalment on Tecsys A/S Indemnification Holdback.

The Company used funds of $1.5 million and $1.1 million for the acquisition of property and equipment and intangible assets in fiscal 2021 and fiscal 2020, respectively.

Additionally, the Company invested in its proprietary products with the capitalization of $0.3 million and $0.6 million reflected as deferred development costs in fiscal 2021 and fiscal 2020, respectively.

Commitments and Contractual Obligations

The Company has a lease agreement for its head office in Montreal, Quebec which expires on November 30, 2025 and has an option to extend for five additional years until November 30, 2030. The Company has a lease agreement for its office in Markham, Ontario. The lease term of ten years and eight months terminates on July 31, 2022 and has two options to extend for 5 additional years per option. The Company has a lease agreement for its office in Laval, Quebec. The lease term of ten years ends on February 28, 2026 and has an option to extend the lease for 5 years until February 28, 2031. The Company also has a lease agreement for its office in Denmark that terminates on December 31, 2026. These are the principal leases of the Company.

As at April 30, 2021, the principal commitments consist of operating leases, long-term debt and other obligations. The following table summarizes significant contractual obligations as at April 30, 2021.

The lease obligations represent the minimum lease payments for leases of office space and equipment recognized on the consolidated balance sheet as lease liabilities under IFRS 16.

In thousands of Canadian dollars

			Payments Due by Period
Contractual Obligations	Total	Less than 1	1 – 3 years	3 – 5 years	After 5 years
		year
Long-term Debt	9,616	1,216	8,400	-	-
Lease obligations	10,949	1,077	3,352	3,242	3,278
Other obligations	5,010	2,157	2,853	-	-
Accounts payable and accrued
liabilities and other liabilities	19,917	19,917	-	-	-
Total Contractual Obligations	45,492	24,367	14,605	3,242	3,278

Other obligations include operating leases with terms of less than 12 months and other service contracts.

Dividend Policy

The Company maintains a quarterly dividend policy. The declaration and payment of dividends is at the discretion of the Board of Directors, which will consider earnings, capital requirements, financial condition and other such factors as the Board of Directors, in its sole discretion, deems relevant.

During fiscal 2021, the Company declared a dividend of $0.06 per share on two occasions that were paid on August 7, 2020 and October 9, 2020 to shareholders of a record at the close of business on July 24, 2020 and September 25, 2020, respectively and declared a dividend of $0.065 per share on two other separate occasions that were paid on January 8, 2021 and April 8, 2021 to shareholders of record at the close of business on December 17, 2020 and March 18, 2021, respectively, for an aggregate of $3.6 million.

During fiscal 2020, the Company declared a dividend of $0.055 per share on two occasions that were paid on August 2, 2019 and October 4, 2019 to shareholders of a record at the close of business on July 19, 2019 and September 20, 2019, respectively and declared a dividend of $0.06 per share on two other separate occasions that were paid on January 10, 2020 and April 9, 2020 to shareholders of record at the close of business on December 19, 2019 and March 19, 2020, respectively, for an aggregate of $3.0 million.

Related Party Transactions

Under the provisions of the executive share purchase plan for key management and other management employees, the Company provided interest-free loans to key management and other management employees of $0.5 million ($0.7 million for the same period of fiscal 2020) to facilitate their purchase of the Company’s common shares during fiscal 2021. As at April 30, 2021, loans outstanding amounted to $0.4 million (April 30, 2020 - $0.5 million).

Contingencies

In the normal course of operations, the Company may be exposed to lawsuits, claims and contingencies. Provisions are recognized as liabilities in instances when there are present obligations and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligations and where such liabilities can be reliably estimated. Although it is possible that liabilities may be incurred in instances where no provision has been made, the Company has no reason to believe that the ultimate resolution of such matters will have a material impact on its financial position.

Subsequent Event

On June 29, 2021, the Company’s Board of Directors declared a quarterly dividend of $0.065 per share to be paid on August 6, 2021 to shareholders of record on July 16, 2021.

Off-Balance Sheet Agreements

The Company was not involved in any off-balance sheet arrangements as at April 30, 2021 with the exception of variable payments related to operating leases and operating leases with terms of twelve months or less.

Current and Anticipated Impacts of Current Economic Conditions

Current overall economic conditions together with market uncertainty and volatility may have an adverse impact on the demand for the Company’s products and services as industry may adjust quickly to exercise caution on capital spending. This uncertainty may impact the Company’s revenue.

Based on ARR of $52.5 million and Professional Services backlog of $33.6 million as of April 30, 2021, the Company’s management believes that quarterly services revenue (Cloud, Maintenance and Subscription revenue plus Professional Services revenue) ranging between $25.0 million and $26.0 million per quarter can be sustained in the short term.

Strategically, the Company continues to focus its efforts on the most likely opportunities within its existing vertical markets and customer base. The Company also currently offers SaaS and subscription-based licensing, hosting services, modular sales and implementations and enhanced payment terms to promote revenue growth. Management sees continued market appetite for SaaS. To the extent Tecsys’ bookings continue to shift from perpetual license to SaaS, revenue and operating profit will be impacted in the medium term and this could be material.

The exchange rate of the U.S. dollar in comparison to the Canadian dollar continues to be an important factor affecting revenues and profitability as the Company currently derives approximately 65% of its business from U.S. customers while the majority of its cost base is in Canadian dollars.

The Company will continue to adjust its business model to ensure that costs are aligned to its revenue expectations and economic reality to the extent possible.

The Company believes that funds on hand together with anticipated cash flows from operations, and its accessibility to the operating line of credit will be sufficient to meet all its needs for a least the next twelve months. The Company can further manage its capital structure by adjusting its dividend policy.

COVID-19

On March 11, 2020, the COVID-19 outbreak was declared a pandemic by the World Health Organization, and has caused significant financial market and social dislocation. The Company continues to operate during the current pandemic. The Company is well-equipped to uphold comprehensive support and services for its end-to-end supply chain execution software through its multi-tiered customer care and support teams. Employees continue to work remotely and support Tecsys’ customers and partners. Work that was historically done both on site and remotely through telephone and video conferencing, including progressing sales cycles and project implementations, is now supported remotely by its employees. To date, Tecsys’ ability to continue to progress sales cycles, sign new orders and execute project implementations has not been affected materially by the pivot to remote work. That said, the second wave of COVID-19 appeared to have an impact on the timing of new customer deals. Tecsys’ end market customer exposure is diverse encompassing a wide range of industries including healthcare, complex distribution and, to a lesser extent, retail. While Tecsys anticipates that some client projects may be postponed or delayed during the pandemic, other client projects are starting up. Based on current activity and considering the Company’s significant project backlog, Tecsys believes that this pandemic is not having a material adverse impact on its operating results. Moreover, Tecsys is not currently experiencing or anticipating any material credit losses as a result of the pandemic. Finally, Tecsys does not currently foresee any material adverse impact on the carrying amounts of its intangible assets, including customer relationships and technology, or on the carrying amount of goodwill, as a result of the pandemic.

The Company will continue to monitor developments of the pandemic and continuously assess the pandemic’s potential further impact on Tecsys’ operations and business. The situation is dynamic, and the ultimate duration and magnitude of the impact of the pandemic on the economy and the financial effect on Tecsys’ operations and business are not known at this time. In developing estimates for the year ended April 30, 2021, management determined that COVID-19 has minimal impact on key assumptions. However, because of the uncertainty that exists, it is not possible to reliably estimate the impact that these developments will have on the Company’s financial results, condition and cash flow.

Financial Instruments and Financial Risk Management

The Company has determined that the carrying values of its short-term financial assets and liabilities, including cash and cash equivalents, accounts receivable, other accounts receivable, short-term investments and accounts payable and accrued liabilities approximate their fair value because of the relatively short period to maturity of the instruments. The fair value of the long-term debt was determined to be not significantly different from its carrying value.

Derivative instruments are also recorded as assets and liabilities measured at their fair value. As such, the fair value of all outstanding foreign exchange contracts representing a $1.7 million gain was recorded in other accounts receivable at April 30, 2021 (April 30, 2020 - $0.3 million net gain was recorded as $0.7 million in accounts payable and accrued liabilities and $1.0 million in other accounts receivable).

Derivatives in the form of forward exchange contracts are used to manage currency risk related to the fluctuation of the U.S. dollar. The Company is exposed to currency risk as a certain portion of the Company’s revenue and expenses are realized in U.S. dollars resulting in U.S. dollar-denominated accounts receivable and accounts payable and accrued liabilities. In addition, certain of the Company’s cash and cash equivalents are denominated in U.S. dollars.

The Company’s hedging strategy is practiced on two fronts. Firstly, the Company enters into forward exchange contracts to hedge some portion of its highly probable future revenue denominated in U.S. dollars over the coming year with the intention of stabilizing revenue and margin expectations due to possible short term exchange fluctuations, and secondly in order to offset the impact of the fluctuation of the U.S. dollar regarding the revaluation of its U.S net monetary asset and liability position. In this regard, the Company practices economic hedging regularly by analyzing its net U.S. monetary asset and liability position and uses forward exchange contracts to equilibrate its position. As such, any change in cash flows associated with derivative instruments is expected to be offset by changes in cash flows related to the net monetary position in the foreign currency and the recognition of highly probable future U.S. denominated revenue and related accounts receivable. The Company uses derivative financial instruments only for risk management purposes, not for generating speculative trading profits.

Financial instruments which potentially subject the Company to credit risk consist principally of cash and cash equivalents, accounts receivable, short-term investments and other receivables. The Company’s cash and cash equivalents are maintained at major financial institutions. The Company manages its credit risk on investments by dealing only with major Canadian banks and investing only in instruments that management believes have high credit ratings. Given these high credit ratings, the Company does not expect any counterparties to these investments to fail to meet their obligations.

As at April 30, 2021 two customers individually accounted for greater than 10% of total accounts receivable and work in progress (April 30, 2020 – no customers were individually greater than 10%). Generally, there is no particular concentration of credit risk related to the accounts receivable due to the distribution of customers and procedures for the management of commercial risks. The Company performs ongoing credit reviews of all its customers and establishes an allowance for expected credit loss when accounts are determined to be uncollectible. Customers do not provide collateral in exchange for credit. As discussed in the COVID-19 section of the MD&A, the Company is not currently experiencing or anticipating any material credit losses as a result of the COVID-19 pandemic.

Refer to note 21 consolidated financial statements for additional discussion of the Company’s risk management policies, including currency risk, credit risk, liquidity risk, interest rate risk and market price risk.

Outstanding Share Data

As at June 29, 2021, the Company has 14,505,095 common shares outstanding. The Company issued 88,552 shares on the exercise of stock options in fiscal 2021.

Critical Accounting Policies

The Company’s critical accounting policies are those that it believes are the most important in determining its financial condition and results. A summary of the Company’s significant accounting policies, including the critical accounting policies discussed below, is set out in the notes to the consolidated financial statements.

Critical accounting judgements and key sources of estimation uncertainty

The preparation of the consolidated financial statements in accordance with IFRS requires management to make estimates, assumptions, and judgments that affect the application of accounting policies and the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities and recognized amounts of revenue and expenses. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or in the period of revision and future periods if the revision affects both current and future periods.

The following are the critical judgements, apart from those involving estimations, that management has made in the process of applying the Company’s accounting policies and that the Company believes could have the most significant impact on reported amounts.

Impairment of assets:

The Company assesses whether there are any indicators of impairment of assets at each reporting period date. In addition, the Company is required to determine the recoverable amount of a cash-generating unit (“CGU”), defined as the smallest identifiable group of assets that generates cash inflows independent of other assets. Management applies judgement in assessing and identifying each CGU.

Key sources of estimation uncertainty

Information about areas requiring the use of judgment, management assumptions and estimates, and key sources of estimation uncertainty that the Company believes could have the most significant impact on reported amounts is noted below:

• (i) Revenue recognition– Determination of distinct performance obligations and stand-alone selling prices: Revenue recognition, particularly in bundled arrangements which may include licenses, professional services, maintenance services and subscription services, requires judgment in identifying performance obligations and allocating revenue to each performance obligation based on the relative stand-alone selling price of each performance obligation. As certain of these performance obligations have a term of more than one year, the identification and the allocation of the consideration received to each distinct performance obligation impacts the amount and timing of revenue recognition.

• (ii) Income taxes:

In assessing the realizability of deferred tax assets, management considers whether it is probable that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income and available tax planning strategies.

Deferred tax assets and liabilities contain estimates about the nature and timing of future permanent and temporary differences as well as the future tax rates that will apply to those differences. Changes in tax laws and rates as well as changes to the expected timing of reversals may have a significant impact on the amounts recorded for deferred tax assets and liabilities. Management closely monitors current and potential changes to tax law and bases its estimates on the best available information at each reporting date.

• (iii) Impairment of assets:

Impairment assessments are based on internal estimates of the recoverable amount of a CGU. This determination requires significant estimates in a variety of areas including cash flows projected based on past experience, actual operating results and future projections, as well as the calculation of discount rates. The Company documents and supports all assumptions made to determine the above estimates and updates such assumptions to reflect the best information available to the Company if and when an impairment assessment requires the recoverable amount of a CGU to be determined.

New standards and interpretations not yet adopted:

A number of new standards, interpretations and amendments to existing standards were issued by the IASB that are not yet effective for the period ended April 30, 2021 and have not been applied in preparing these consolidated financial statements.

The following standards or amendments are currently being assessed by the Company:

Standard	Issue date	Efective date for the	Impact
		Company
IAS 37, Provisions, Contingent	May 2020	May 1, 2022	In assessment
Liabilities and Contingent Assets
IAS 1, Presentation of Financial	January 2020, July 2020	May 1, 2023	In assessment
Statements IAS 8, Defnition of Accounting	and February2021 February 2021	May 1, 2023	In assessment
Estimates

IAS 37, Provisions, Contingent Liabilities and Contingent Assets:

In May 2020, the IASB issued Onerous Contracts – Cost of Fulfilling a Contract (Amendments to IAS 37) amending the standard regarding costs a company should include as the cost of fulfilling a contract when assessing whether a contract is onerous. The changes in Onerous Contracts – Cost of Fulfilling a Contract (Amendments to IAS 37) clarify that the “cost of fulfilling” a contract comprises both the incremental costs of fulfilling that contract or an allocation of other costs that relate directly to fulfilling contracts. The amendments to IAS 37 are effective for annual reporting periods beginning on or after January 1, 2022. Earlier application is permitted. The Company is currently assessing the impact of the amendments.

IAS 1, Presentation of Financial Statements:

In January 2020, the IASB issued Classification of Liabilities as Current or Non-current (Amendments to IAS 1) which provides a general approach to the classification of liabilities under IAS 1 based on the contractual arrangements in place at the reporting date. The amendments in Classification of Liabilities as Current or Non-current (Amendments to IAS 1) affect only the presentation of liabilities in the statement of financial position, not the amount or timing of recognition of any asset, liability income or expenses, or the information that entities disclose about those items. In July 2020, the IASB published Classification of Liabilities as Current or Non-current – Deferral of Effective Date (Amendment to IAS 1) deferring the effective date of the January 2020 amendments to IAS 1 by one year.

In February 2021 the IASB issued Disclosure Initiative – Accounting Policies (Amendments to IAS 1 and IFRS Practice Statements 2 Making Materiality Judgements) which provides guidance on accounting policy disclosure. The amendments in the Disclosure Initiative – Accounting Policies (Amendments to IAS 1 and IFRS Practice Statements 2 Making Materiality Judgements) require companies to disclose their material accounting policies rather than their significant accounting policies. In addition, the amendments clarify that accounting policies related to immaterial transactions or events or conditions do not need to be disclosed, and also that not all accounting policies that relate to material transactions, or events or conditions are themselves material to a company’s financial statements.

Both amendments to IAS 1 are effective for annual reporting periods beginning on or after January 1, 2023. Earlier application is permitted. The Company is currently assessing the impact of the amendments.

IAS 8, Definition of Accounting Estimates:

In February 2021, the IASB issued Definition of Accounting Estimates (Amendments to IAS 8) clarifies the relationship between accounting policies and accounting estimates, by specifying that a company develops an accounting estimate to achieve the objective set out by an accounting policy. The amendments to IAS 8 are effective for annual reporting periods beginning on or after January 1, 2023. Earlier adoption is permitted. The Company is currently assessing the impact of the amendments.

Risks and Uncertainties

The Company has incurred net losses in the past and may incur losses in the future.

The Company recognized net profits from fiscal 2008 to fiscal 2018, incurred a net loss in fiscal 2019 and then recognized profit in fiscal 2020 and fiscal 2021. The Company continuously adjusts its operating model for long term profitability. However, there can be no assurance that the Company will achieve or sustain profitability in the future. As of April 30, 2021, the Company had retained earnings of $12.4 million. The Company’s dependence on a market characterized by rapid technological change make the prediction of future results of operations difficult or impossible. There can be no assurance that the Company can generate substantial revenue growth on a quarterly or annual basis, or that any revenue growth that is achieved can be sustained. Revenue growth that the Company has achieved or may achieve may not be indicative of future operating results. In addition, the Company may increase its operating expenses in order to fund higher levels of R&D, increase its sales and marketing efforts, develop new distribution channels, broaden its customer support capabilities and expand its administrative resources in anticipation of future growth. To the extent that increases in such expenses precede or are not subsequently followed by increased revenues, the Company’s business, results of operations and financial condition would be materially adversely affected.

The Company’s operations could be adversely affected by events outside of its control, such as natural disasters, wars or health epidemics.

The Company may be impacted by business interruptions resulting from pandemics and public health emergencies, including those related to COVID-19 pandemic, geopolitical actions, including war and terrorism or natural disasters including earthquakes, typhoons, floods and fires. COVID-19 has had disruptive effects on the global economy and such impact and increased uncertainty has increased volatility in worldwide financial markets. Although the full extent of the impact of the outbreak is uncertain, increased or prolonged economic disruption as a result of the pandemic may have an adverse impact on the Company’s results of operations or financial condition. A prolonged disruption may in the future impact the Company’s ability to sign new orders and execute project implementations. This may have a material adverse impact on the Company’s ability to maintain operating cash flow and collect trade receivables. It may also have a materially adverse impact on the recoverability of the Company’s long-term non-financial assets, including intangible assets and goodwill.

If the Company is unable to attract new customers or sell additional products to its existing customers, its revenue

growth and profitability will be adversely affected.

To increase its revenue and achieve and maintain profitability, the Company must regularly add new customers or sell additional solutions to its existing customers, which it plans to do. Numerous factors, however, may impede its ability to add new customers and sell additional solutions to its existing customers, including its inability to convert companies that have been referred to the Company by its existing network into paying customers, failure to attract and effectively train new

sales and marketing personnel, failure to retain and motivate its current sales and marketing personnel, failure to develop relationships with partners or resellers and/or failure to ensure the effectiveness of its marketing programs. In addition, if prospective customers do not perceive its solutions to be of sufficiently high value and quality, it will not be able to attract the number and types of new customers that it is seeking.

Impact of transitioning from primarily on-premise perpetual license sales to a higher mix of Software as a Service

("SaaS").

The Company offers certain of its solutions as Software as a Service (“SaaS”) which will negatively impact revenue and earnings in the transition period. The Company significantly began to offer more of its solutions under the SaaS option in fiscal 2019, in addition to its on-premise perpetual license option. Under a SaaS subscription agreement, customers pay a periodic fee for the right to use the Company’s software within a cloud-based environment that it provides and manages over a specified period of time. The Company believes that over time a growing number of its customers and prospects will elect to purchase its solutions as SaaS rather than under an on-premise perpetual license. SaaS revenue is recognized ratably over the term of the SaaS arrangement whereas on-premise license revenue is generally recognized upon purchase. Because of this difference in revenue recognition timing, an increase in the mix of SaaS sales is expected to result in declining on-premise perpetual license sales, and this would have a negative short-term impact on revenue and profit.

Fluctuations in quarterly results may fail to meet the expectations of investors or security analyst which could cause

the Company’s share price to decline.

The Company’s quarterly operating results have in the past, and will in the future, fluctuate significantly, depending on factors such as the demand for the Company’s products, the size and timing of orders, the mix of on-premise perpetual license and SaaS, the number, timing and significance of new product announcements by the Company and its competitors, the ability of the Company to develop, introduce and market new and enhanced versions of its products on a timely basis, the level of product and price competition, changes in operating expenses, changes in average selling prices and product mix, sales personnel changes, the mix of direct and indirect sales, product returns and general economic factors, among others.

In particular, the Company’s quarterly results are affected by the mix of on-premise perpetual license and SaaS, timing of new releases of its products and upgrades. The Company’s operating expenses are based on anticipated revenue levels in the short term and are relatively fixed and incurred throughout the quarter. As a result, if the revenues are not realized in the expected quarter, the Company’s operating results could be materially adversely affected. Quarterly results in the future will be influenced by these or other factors, including possible delays in the shipment of new products and purchasing delays of current products as customers anticipate new product releases. Accordingly, there could be significant variations in the Company’s quarterly operating results.

Lengthy sales and implementation cycle could have an adverse effect on the amount, timing and predictability of

the Company’s revenue.

The sale and implementation of the Company’s products generally involves a significant commitment of resources by prospective customers. As a result, the Company’s sales process is often subject to delays associated with lengthy approval processes attendant to significant expenditures. For these and other reasons, the sales cycle associated with the signing of new sales agreements for the Company’s products varies substantially from customer to customer and typically lasts between six and twelve months. During this time, the Company may devote significant resources to a prospective customer, including costs associated with multiple site visits, product demonstrations and feasibility studies, and experience a number of significant delays over which it has no control. In addition, following a new sales agreement, the implementation period may involve six to twenty-four months for consulting services, customer training and integration with the customer’s other existing systems.

Defects, delays or interruptions in providing SaaS will have an impact on the operating results of the Company.

If the Company encounters defects, delays or interruptions in its SaaS, the demand for these services could diminish, and the Company could incur significant liability. The Company currently utilizes data center hosting facilities and cloud computer service providers, which are managed by third-parties, to provide cloud-based solutions and hosting services to its customers. If the data center facilities or cloud compute service providers fail or encounter any damage, it could result

in interruptions in services to the Company’s customers. This could result in unanticipated downtime for the Company’s customers, and in turn, its reputation and business could be adversely affected. In addition, if the Company’s customers use SaaS arrangements in unanticipated ways, this could cause an interruption in service for other customers attempting to access their data. Moreover, since SaaS customers access the services via the internet, any interruptions in the internet availability will affect the customers’ operations.

If any defects, delays or interruption in the Company’s SaaS solutions occur, customers could elect to cancel their service, delay or withhold payment to the Company, not purchase from the Company in the future or make claims against it, which could adversely affect its business reputation, results of operations, cash flow, and financial condition.

Security breaches could delay or interrupt service to its customers, harm its reputation or subject the Company to significant liability and adversely affect its business and financial results. Its ability to retain customers and attract new customers could be adversely affected by an actual or perceived breach of security relating to customer information.

The Company’s operations involve the storage and transmission of the confidential information of many of its customers and security breaches could expose it to a risk of loss of this information, litigation, indemnity obligations and other liability. If its security measures are breached as a result of third-party action, employee error, malfeasance or otherwise, and, as a result, someone obtains unauthorized access to its customers’ data, including personally identifiable information regarding users, damage to its reputation is likely, its business may suffer and it could incur significant liability. Because techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until launched against a target, it may be unable to prevent these techniques or to implement adequate preventative measures. The Company has implemented technical, organizational and physical security measures, including employee training, backup systems, monitoring and testing and maintenance of protective systems and contingency plans, to protect and to prevent unauthorized access to confidential information of its customers and to reduce the likelihood of disruptions to its systems.

Despite these measures, all its information systems, including back-up systems and any third party service provider systems that it employs, are vulnerable to damage, interruption, disability or failure due to a variety of reasons, including physical theft, electronic theft, fire, power loss, computer and telecommunication failures or other catastrophic events, as well as from internal and external security breaches, denial of service attacks, viruses, worms and other known or unknown disruptive events. The Company or its third-party service providers may be unable to anticipate, timely identify or appropriately respond to one or more of the rapidly evolving and increasingly sophisticated means by which computer hackers, cyber-terrorists and others may attempt to breach its security measures or those of its third-party service providers’ information systems.

If a breach of its security measures occurs, the market perception of their effectiveness could be harmed and the Company could lose potential sales and existing customers. Further, a security breach affecting one of its competitors or any other company that provides hosting services or delivers applications under a SaaS model, even if no confidential information of its customers is compromised, may adversely affect the market perception of its security measures and it could lose potential sales and existing customers.

The Company’s ability to develop new products and services in order to sell its solutions into new markets or further

penetrate its existing markets will impact its revenue growth.

The software industry is characterized by rapid technological change and frequent new product introductions. Accordingly, the Company believes that its future success depends upon its ability to enhance current products or develop and introduce new products that enhance performance and functionality at competitive prices. The Company’s inability, for technological or other reasons, to develop and introduce products in a timely manner in response to changing market conditions or customer requirements could have a material adverse effect on its business, results of operations and financial condition.

The ability of the Company to compete successfully will depend in large measure on its ability to maintain a technically competent R&D staff and adapt to technological changes and advances in the industry, including providing for the continued compatibility of its software products with evolving computer hardware and software platforms and operating environments. There can be no assurance that the Company will be successful in these efforts.

The markets in which the Company participates is highly competitive, its failure to compete successfully would make

it difficult to add and retain customers and would reduce and impede its growth.

The Company competes in many cases against companies with more established and larger sales and marketing organizations, larger technical staff and significantly greater financial resources. As the market for the Company’s products

continues to develop, additional competitors may enter the market and competition may intensify. Additionally, there can be no assurance that competitors will not develop products superior to the Company’s products or achieve greater market acceptance due to pricing, sales channels or other factors.

If the Company fails to retain its key employees, its business would be negatively impacted.

The Company’s dependence on key personnel to operate its business represents risk of loss of expertise if key personnel were to leave.

The Company depends on the experience and expertise of its executive management team. Competition for executives, as well as for skilled product development and technical personnel, in the software industry is intense and the Company may not be able to retain or recruit needed personnel. If the Company is not able to retain and attract existing and additional highly-qualified management, sales and technical personnel, it may not be able to successfully execute its business strategy.

The Company’s ability to support the growth of its business will be substantially dependent upon having in place highly trained internal and third-party resources to conduct pre-sales activity, product implementation, training and other customer support services.

The Company’s strategy includes pursuing acquisitions and its potential inability to successfully integrate newlyacquired companies or business may adversely affect its financial results.

The Company may continue to expand its operations or product line through the acquisition of additional businesses, products or technologies which may include different geographic locations. Acquisitions may involve a number of special risks, including diversion of management’s attention, failure to retain key acquired personnel, risk associated with specific vertical markets, business model, integration, geographic locations, unanticipated events or circumstances and legal liabilities, some or all of which could have a material adverse effect on the Company’s business, results of operations and financial condition.

Risk of software defects could adversely affect the Company’s business.

Software products as complex as those offered by the Company frequently contain errors or defects, especially when first introduced or when new versions or enhancements are released. Despite product testing, the Company has in the past released products with defects, discovered software errors in certain of its new versions after introduction and experienced delays or lost revenue during the period required to correct these errors. The Company regularly introduces new releases and periodically introduces new versions of its software. There can be no assurance that, despite testing by the Company and its customers, defects and errors will not be found in existing products or in new products, releases, versions or enhancements after commencement of commercial shipments.

Risk related to protection of intellectual property

The Company considers certain aspects of its internal operations, software and documentation to be proprietary, and relies on a combination of copyright, patents, trademark and trade secret laws; confidentiality agreements with employees and third parties; protective contractual provisions (such as those contained in its license agreements with consultants, vendors, partners and customers) and other measures to maintain its intellectual property rights. Any of the Company’s intellectual property rights could be challenged, invalidated, circumvented or copied, causing a competitive disadvantage, lost opportunities or market share, and potential costly litigation to enforce or re-establish the Company’s rights. This could materially and adversely affect the Company’s business, operating results and financial condition.

Risk of third-party claims for infringement

The Company is not aware that any of its products infringe the proprietary rights of third parties. There can be no assurance, however, that third parties will not claim such infringement by the Company or its licensees with respect to current or future products. The Company expects that software developers will increasingly be subject to such claims as the number of products and competitors in the Company’s industry segment grows and as functionality of products in different industry segments overlaps.

Reliance on third-party software

The Company relies on certain software that it sub-licenses from third parties. There can be no assurance that these thirdparty software companies will continue to permit the Company to sub-license on commercially reasonable terms.

Cyber security

With the increasing sophistication and persistence of cyber-threats, Tecsys is well aware of the need to manage the risks of data loss, malware and malicious attacks, whether originating internally or externally. Tecsys has implemented a continuouslyevolving security program to keep pace with these threats. Independent checks reveal that Tecsys has not experienced material breaches in cyber security. Tecsys continues to monitor these risks and continues to fortify its defenses against intrusion and refine its security governance. Despite the Company’s security measures, its information technology and infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance or other disruptions. Any such breach could compromise Tecsys’ networks and the information stored there could be accessed, publicly disclosed, lost or stolen.

Currency risk

A significant part of the Company’s revenues are realized in U.S. dollars. Fluctuations in the exchange rate between the U.S. dollar and other currencies may have a material adverse effect on the margin the Company may realize from its products and services and may directly impact results of operations. From time to time, the Company may take steps to manage such risk by engaging in exchange rate hedging activities; however, there can be no assurance that the Company will be successful in such hedging activities. The Company also has an operating subsidiary in Denmark. Significant fluctuations between the Danish krone and the Canadian dollar may have an impact on the Company’s operating results.

The Company may need to raise additional funds to pursue its growth strategy or continue its operations, and it may

be unable to raise capital when needed or on acceptable terms.

From time to time, the Company may seek additional equity or debt financing to fund its growth, enhance is products and services, respond to competitive pressures or make acquisitions or other investments. Its business plans may change, general economic, financial or political conditions in its markets may deteriorate or other circumstances may arise, in each case that have a material adverse effect on its cash flows and the anticipated cash needs of its business. Any of these events or circumstances could result in significant additional funding needs, requiring the Company to raise additional capital. It cannot predict the timing or amount of any such capital requirements at this time. If financing is not available on satisfactory terms, or at all, it may be unable to expand its business at the rate desired and its results of operations may suffer. Financing through issuances of equity securities would be dilutive to holders of its shares.

Disclosure Controls and Procedures

Disclosure controls and procedures are designed to provide reasonable assurance that material information is gathered and reported to senior management on a timely basis so that appropriate decisions can be made regarding public disclosure. The Company’s Chief Executive Officer and its Chief Financial Officer are responsible for establishing and maintaining disclosure controls and procedures regarding the communication of information. They are assisted in this responsibility by the Company’s Executive Committee, which is composed of members of senior management. Based on the evaluation of the Company’s disclosure controls and procedures, the Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures were effective as of April 30, 2021.

Internal Control over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting to provide reasonable assurance regarding the reliability of the Company’s financial reporting and its compliance with IFRS in its consolidated financial statements.

An evaluation was carried out under the supervision and with the participation of the Company’s Chief Executive Officer and the Chief Financial Officer to evaluate the design and operating effectiveness of the Company’s internal controls over financial reporting as at April 30, 2021. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the internal control over financial reporting, as defined by National Instrument 52-109 was appropriately designed and operating effectively. The evaluations were conducted in accordance with the framework criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission

(2013) (COSO), a recognized control model, and the requirements of National Instrument 52-109, Certification of Disclosures in Issuers’ Annual and Interim Filings.

For the period beginning on February 1, 2021 and ending on April 30, 2021 there have been no changes in the Company’s internal controls over financial reporting that could have materially affected or is reasonably likely to materially affect the Company’s internal controls over financial reporting.

Forward-Looking Information

This management’s discussion and analysis contains “forward-looking information” within the meaning of applicable securities legislation. Although the forward-looking information is based on what the Company believes are reasonable assumptions, current expectations, and estimates, investors are cautioned from placing undue reliance on this information since actual results may vary from the forward-looking information. Forward-looking information may be identified by the use of forward-looking terminology such as “believe”, “intend”, “may”, “will”, “expect”, “estimate”, “anticipate”, “continue” or similar terms, variations of those terms or the negative of those terms, and the use of the conditional tense as well as similar expressions.

Such forward-looking information that is not historical fact, including statements based on management’s belief and assumptions, cannot be considered as guarantees of future performance. They are subject to a number of risks and uncertainties, including but not limited to future economic conditions, the markets that the Company serves, the actions of competitors, major new technological trends, and other factors, many of which are beyond the Company’s control, that could cause actual results to differ materially from those that are disclosed in or implied by such forward-looking information. The Company undertakes no obligation to update publicly any forward-looking information whether as a result of new information, future events or otherwise other than as required by applicable legislation. Important risk factors that may affect these expectations include, but are not limited to, the factors described under the section “Risks and Uncertainties”.

Actual results and developments are likely to differ, and may differ materially, from those expressed or implied by the forward-looking statements contained in this management discussion and analysis. Such statements are based on a number of assumptions which may prove to be incorrect, including, but not limited to, assumptions about: (i) competitive environment; (ii) operating risks; (iii) the Company’s management and employees; (iv) capital investment by the Company’s customers; (v) customer project implementations; (vi) liquidity; (vii) current global financial conditions; (viii) implementation of the Company’s commercial strategic plan; (ix) credit; (x) potential product liabilities and other lawsuits to which the Company may be subject; (xi) additional financing and dilution; (xii) market liquidity of the Company’s common shares; (xiii) development of new products; (xiv) intellectual property and other proprietary rights; (xv) acquisition and expansion; (xvi) foreign currency; (xvii) interest rates; (xviii) technology and regulatory changes; (xix) internal information technology infrastructure and applications, (xx) cyber security and (xxi) expected impact of COVID-19 on the Company’s future operations and performance.