TECSYS Reports Financial Results for Second Quarter of Fiscal 2017

MONTREAL, QUEBEC--(Marketwired - Dec. 1, 2016) - TECSYS Inc. (TCS.TO), an industry-leading supply chain management software company, today announced its results for the second quarter of fiscal year 2017, ended October 31, 2016. All dollar amounts are expressed in Canadian currency and are prepared in accordance with International Financial Reporting Standards (IFRS) and are unaudited.

Second Quarter Highlights:

• Total revenue for Q2 2017 increased to $16.5M, $756K or 5% higher, compared to $15.8M for Q2 2016.

• Recurring revenue on an annualized basis grew 15% compared to Q2 2016 to $26.5M which represents 38% of the last 12 months trailing revenue.

• Total gross margin percentage in Q2 2017 was 50% compared to 49% in Q2 2016.

• Operating expenses for Q2 2017 increased to $8.0M, higher by $682K or 9%, compared to $7.3M for the same three-month period last fiscal year.

• EBITDA of $935K in Q2 2017 compared to $1.2M in Q2 2016.

• Net profit of $206K, or $0.02 per share, in Q2 2017 compared to $367K, or $0.03 per share, for Q2 2016.

• Total contract value bookings amounted to $10.9M in Q2 2017 in comparison to $13.4M for Q2 2016.

• Cash and cash equivalents totalled $11.5M at the end of Q2 2017 compared to $9.7M at the end of fiscal 2016.

"In the second quarter of fiscal 2017, we continued to grow our account base with four new customer contracts signed, including two complex distribution customers, one healthcare organization, and one large hospital network," said Peter Brereton, President and CEO of TECSYS Inc. "Our strategy to grow the complex distribution channel is proving successful with the total contract value signed in the first half of fiscal 2017 already higher than the total amount signed in all of fiscal year 2016".

"New account sales did very well during the quarter with total new account bookings up 50% for the quarter and 30% for the first six months. We experienced some delays in base account upgrades which we believe is attributable to the uncertainty of the U.S. election. Since then, business is coming back to normal and we are optimistic we will be able to execute our strong pipeline in the back-half of our fiscal year.

We were pleased to see our recurring revenues rise by 15% over Q2 of last year. We believe we are entering a new phase in the business with the re-write of our software platform behind us and the heavy ramp up in sales & marketing yielding results and beginning to normalize as a percentage of the business model. With this in mind, the board has decided to increase the dividend by 50% as outlined below. We believe this brings projected dividend payout into the 30-35% of projected free cash flow range." added Mr. Brereton.

Berty Ho-Wo-Cheong, Vice President, Finance & Administration and CFO commented "If we compare the operating expenses during the quarter to the previous year's quarter, we had three significant cost items worth mentioning. First our September user conference, which is held every 18 months, incurred net expenses of approximately $250,000. Second, R&D capitalization during the second quarter was $27K against $280,000 in the second quarter of fiscal 2016. Third, we had an exceptional legal expense that accounted for about $416,000 compared to $162,000 for the same period last year. With a decision rendered in our favour in September, we look forward to potentially recouping a substantial portion of our legal expenses. Adjusting for these costs for both periods, our Profit from Operations in the quarter would have been $959,000 against $383,000 for the same period of last year. We believe that the exceptional legal fees and the R&D capitalization are now behind us.

Results from Operations		3 Months Ended Oct. 31 2016			3 Months Ended Oct. 31 2015			6 Months Ended Oct. 31 2016			6 Months Ended Oct. 31, 2015			Trailing 12 Months Ended Oct. 31, 2016			Trailing 12 Months Ended Oct. 31, 2015
In thousands of dollars except per share amounts
Total Revenue		$16,518			$15,762			$32,615			$30,693			$69,388			$61,417
Gross Margin		$8,291			$7,790			$15,897			$15,210			$35,512			$30,079
Gross Margin %		50	%		49	%		49	%		50	%		51	%		49	%
Operating Expenses		$7,971			$7,289			$15,334			$14,502			$31,108			$28,430
Op. Ex. As % of Revenue		48	%		46	%		47	%		47	%		45	%		46	%
Profit from Operations		$320			$501			$563			$708			$4,404			$1,649
EBITDA		$935			$1,153			$1,749			$1,984			$6,929			$4,225
EPS		$0.02			$0.03			$0.03			$0.04			$0.38			$0.10
Contract Bookings		$10,920			$13,415			$16,936			$20,102			$39,029			$48,107

First Half Highlights:

• Revenue for the first six months of fiscal 2017 was $32.6, up 6% from $30.7M in the first half of last fiscal year.

• EBITDA for the first half of FY 2017 was $1.7M compared to $2.0M in the same period of fiscal 2016.

• Profit from operations for the first half of fiscal 2017 was $563K compared to $708K in the same period of fiscal 2016.

• Net profit for the first six months of fiscal 2017 was $334K, or $0.03 per share, compared to $436K, or $0.04 per share, for the same period of the prior fiscal year.

• Total contract bookings for the first six months of fiscal 2017 totalled $16.9M.

The Company has declared a dividend of $0.045 per share to be paid on January 12, 2017 to shareholders of record at the close of business on December 22, 2016.

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

Second Quarter 2017 Results Conference Call

Date: December 2, 2016 Time: 8:30 am EST

Phone number: (416) 981-9001 or (800) 920-3356

The call can be replayed by calling (416) 626-4100 or (800) 558-5253 (access code: 21822170).

About TECSYS

TECSYS provides transformative supply chain solutions that equip our customers to succeed in a rapidly- changing omni-channel world. TECSYS solutions are built on a true enterprise supply chain platform, and include warehouse management, distribution and transportation management, as well as complete financial management and analytics. Customers running on TECSYS' Supply Chain Platform are confident knowing they can execute, day in and day out, regardless of business fluctuations or changes in technology, they can adapt and scale to any business needs or size, and they can expand and collaborate with customers, suppliers and partners as one borderless enterprise. From demand planning to demand fulfillment, TECSYS puts power into the hands of both front line workers and back office planners, and unshackles business leaders so they can see and manage their supply chains like never before.

TECSYS is the market leader in supply chain solutions for health systems and hospitals. Over 600 mid-size and Fortune 1000 customers trust their supply chains to TECSYS in the healthcare, service parts, third- party logistics, and general wholesale high-volume distribution industries. TECSYS' shares are listed on the Toronto Stock Exchange under the ticker symbol TCS.

The statements in this news release relating to matters that are not historical fact are forward looking statements that are based on management's beliefs and assumptions. Such statements are not guarantees of future performance and are subject to a number of uncertainties, including but not limited to future economic conditions, the markets that TECSYS Inc. serves, the actions of competitors, major new technological trends, and other factors beyond the control of TECSYS Inc., which could cause actual results to differ materially from such statements. More information about the risks and uncertainties associated with TECSYS Inc.'s business can be found in the MD&A section of the Company's annual report and annual information form for the fiscal year ended April 30th, 2016. These documents have been filed with the Canadian securities commissions and are available on our website (www.tecsys.com) and on SEDAR (www.sedar.com).

Copyright © TECSYS Inc. 2016. All names, trademarks, products, and services mentioned are registered or unregistered trademarks of their respective owners.

TECSYS Inc.
Condensed Interim Consolidated Statements of Financial Position
(Unaudited)
As at October 31, 2016 and April 30, 2016
(in thousands of Canadian dollars)
			October 31,			April 30,
			2016			2016
Assets
Current assets
	Cash and cash equivalents	$	11,474		$	9,704
	Accounts receivable		13,504			18,239
	Work in progress		1,844			513
	Other accounts receivable		935			1,393
	Tax credits		4,188			4,893
	Inventory		908			744
	Prepaid expenses		1,418			1,622
Total current assets			34,271			37,108
Non-current assets
	Tax credits		1,633			1,483
	Property and equipment		2,453			2,633
	Deferred development costs		3,161			3,817
	Other intangible assets		1,674			1,831
	Goodwill		3,596			3,596
	Deferred tax assets		2,229			2,222
Total non-current assets			14,746			15,582
Total assets		$	49,017		$	52,690
Liabilities
Current liabilities
	Accounts payable and accrued liabilities	$	9,109		$	10,399
	Current portion of long-term debt		1,474			1,455
	Deferred revenue		10,810			11,205
Total current liabilities			21,393			23,059
Non-current liabilities
	Long-term debt		1,153			1,889
	Other non-current liabilities		291			296
Total non-current liabilities			1,444			2,185
Total liabilities			22,837			25,244
Equity
	Share capital		8,349			8,349
	Contributed surplus		9,577			9,577
	Retained earnings		8,508			8,913
	Accumulated other comprehensive (loss) income		(254	)		607
Total equity attributable to the owners of the Company			26,180			27,446
Total liabilities and equity		$	49,017		$	52,690

TECSYS Inc.
Condensed Interim Consolidated Statements of Income and Comprehensive Income
(Unaudited)
Three and six-month periods ended October 31, 2016 and 2015
(in thousands of Canadian dollars, except per share data)
			Three Months			Three Months		Six Months			Six Months
			Ended			Ended		Ended			Ended
			October 31,			October 31,		October 31,			October 31,
			2016			2015		2016			2015
Revenue:
	Proprietary products	$	2,922		$	3,000	$	5,278		$	5,148
	Third-party hardware and software products		1,831			2,092		4,001			4,156
	Services		11,181			10,172		22,200			20,488
	Reimbursable expenses		584			498		1,136			901
Total revenue			16,518			15,762		32,615			30,693
Cost of revenue:
	Products		1,578			1,914		3,276			3,522
	Services		6,065			5,560		12,306			11,060
	Reimbursable expenses		584			498		1,136			901
Total cost of revenue			8,227			7,972		16,718			15,483
Gross profit			8,291			7,790		15,897			15,210
Operating expenses:
	Sales and marketing		3,769			3,503		7,355			7,095
	General and administration		1,719			1,391		3,059			2,760
	Research and development, net of tax credits		2,483			2,395		4,920			4,647
Total operating expenses			7,971			7,289		15,334			14,502
Profit from operations			320			501		563			708
Net finance costs			55			32		151			72
Profit before income taxes			265			469		412			636
Income taxes			59			102		78			200
Profit attributable to the owners of the Company		$	206		$	367	$	334		$	436
Other comprehensive (loss) income:
	Effective portion of changes in fair value on designated revenue hedges		(136	)		356		(861	)		(227	)
Comprehensive income (loss) attributable to the owners of the Company		$	70		$	723	$	(527	)	$	209
Basic and diluted earnings per common share		$	0.02			0.03	$	0.03		$	0.04

TECSYS Inc.
Condensed Interim Consolidated Statements of Cash Flows
(Unaudited)
Six-month periods ended October 31, 2016 and 2015
(in thousands of Canadian dollars)
			Six Months			Six Months
			Ended			Ended
			October 31,			October 31,
			2016			2015
Cash flows from (used in) operating activities:
Profit for the period		$	334		$	436
Adjustments for:
	Depreciation of property and equipment		413			373
	Depreciation of deferred development costs		683			694
	Depreciation of other intangible assets		247			243
	Gain on disposal of property and equipment		-			(12	)
	Net finance costs		151			72
	Unrealized foreign exchange and others		575			111
	Non-refundable tax credits		(457	)		(150	)
	Income taxes		78			150
	Operating activities excluding changes in non-cash working capital items related to operations		2,024			1,917
	Accounts receivable		4,735			(1,094	)
	Work in progress		(1,331	)		(505	)
	Other accounts receivable		(598	)		(479	)
	Tax credits		934			1,472
	Inventory		(164	)		180
	Prepaid expenses		204			(32	)
	Accounts payable and accrued liabilities		(1,839	)		(643	)
	Deferred revenue		(395	)		(224	)
	Changes in non-cash working capital items related to operations		1,546			(1,325	)
Net cash from operating activities			3,570			592
Cash flows used in financing activities:
	Repayment of long-term debt		(717	)		(727	)
	Purchase of share options for cancellation		-			(4	)
	Payment of dividends		(739	)		(616	)
	Interest paid		(49	)		(74	)
Net cash used in financing activities			(1,505	)		(1,421	)
Cash flows (used in) from investing activities:
	Interest received		55			36
	Acquisitions of property and equipment		(233	)		(204	)
	Proceeds on disposal of property and equipment		-			12
	Acquisitions of other intangible assets		(90	)		(47	)
	Deferred development costs		(27	)		(679	)
Net cash used in investing activities			(295	)		(882	)
Net increase (decrease) in cash and cash equivalents during the period			1,770			(1,711	)
Cash and cash equivalents - beginning of period			9,704			10,815
Cash and cash equivalents - end of period		$	11,474		$	9,104

TECSYS Inc.
Condensed Interim Consolidated Statements of Changes in Equity
(Unaudited)
Six-month periods ended October 31, 2016 and 2015
(in thousands of Canadian dollars, except number of shares)
			Share capital		Contributed	Accumulated		Retained		Total
			Number	Amount	surplus	other comprehensive		earnings
						income (loss)
Balance, April 30, 2016			12,315,326	$ 8,349	$ 9,577	$ 607		$ 8,913		$ 27,446
	Profit for the period		-	-	-	-		334		334
	Other comprehensive loss for the period:
		Effective portion of changes in fair value on designated revenue hedges	-	-	-	(861	)	-		(861	)
Total comprehensive income (loss) for the period			-	-	-	(861	)	334		(527	)
	Dividends to equity owners		-	-	-	-		(739	)	(739	)
Total transactions with owners of the Company			-	-	-	-		(739	)	(739	)
Balance, October 31, 2016			12,315,326	$ 8,349	$ 9,577	$ (254	)	$ 8,508		$ 26,180
Balance, April 30, 2015			12,315,326	$ 8,349	$ 9,577	$ 95		$ 5,341		$ 23,362
	Profit for the period		-	-	-	-		436		436
	Other comprehensive loss for the period:
		Effective portion of changes in fair value on designated revenue hedges	-	-	-	(227	)	-		(227	)
Total comprehensive income (loss) for the period			-	-	-	(227	)	436		209
	Dividends to equity owners		-	-	-	-		(616	)	(616	)
Total transactions with owners of the Company			-	-	-	-		(616	)	(616	)
Balance, October 31, 2015			12,315,326	$ 8,349	$ 9,577	$ (132	)	$ 5,161		$ 22,955