Mr. Peter Brereton reports

TECSYS REPORTS FINANCIAL RESULTS FOR THE SECOND QUARTER OF FISCAL 2024

TECSYS Inc. has released its results for the second quarter of fiscal year 2024, ended Oct. 31, 2023. All dollar amounts are expressed in Canadian currency and are prepared in accordance with international financial reporting standards (IFRS).

"We have made notable progress this quarter, with a 37-per-cent increase in SaaS revenue," said Peter Brereton, president and chief executive officer of TECSYS. "Our activities in the quarter have strengthened our market position, bolstered our customer and partner communities, and reaffirmed our commitment to innovation. We are seeing strong pipeline expansion and activity across verticals. Notably, there is accelerated demand for our pharmacy supply chain solutions, where we have multiple new customer proof points in the face of Drug Supply Chain Security Act regulation enforcement. On top of that, our user conference in Scottsdale in the month of September was excellent, with attendance up 40 per cent and a massive increase in average customer size."

Mark Bentler, chief financial officer of TECSYS, added, "We continue to see positive momentum with SaaS RPO up 34 per cent, our SaaS margins continuing to expand and our partner driven pipeline up 98 per cent from the same time last year."

Second quarter highlights:

• SaaS (software-as-a-service) revenue increased by 37 per cent to $12.1-million, up from $8.8-million in Q2 2023.
• SaaS subscription bookings (i) (measured on an ARR (annual recurring revenue) (i) basis) increased by 34 per cent to $3.7-million, compared with $2.8-million in the second quarter of fiscal 2023.
• SaaS remaining performance obligation (RPO (i)) increased by 34 per cent to $146.7-million at Oct. 31, 2023, up from $109.5-million at the same time last year.
• ARR (i) at Oct. 31, 2023, was up 19 per cent to $84.9-million, compared with $71.2-million at Oct. 31, 2022.
• Professional services revenue was down by 5 per cent to $12.9-million, compared with $13.5-million in Q2 fiscal 2023.
• Total revenue, excluding hardware revenue, was $34.1-million, 8 per cent higher than $31.5-million reported for Q2 last year, while total revenue rose 9 per cent to reach $41.5-million.
• Gross margin was 44 per cent, flat compared with the same period of fiscal 2023.
• Total gross profit increased to $18.3-million, up 10 per cent from $16.7-million in Q2 fiscal 2023.
• Operating expenses increased to $18.7-million, higher by $3.1-million or 20 per cent compared with $15.6-million in Q2 last year.
• Loss from operations was $400,000, compared with a profit from operations of $1.0-million in Q2 last year.
• Net loss was $340,000 or two cents per share on a fully diluted basis in Q2 fiscal 2024, compared with a net profit of $700,000 or five cents per share for the same period in fiscal 2023.
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) (ii) was $1.0-million, compared with $2.8-million reported in Q2 last year.

Year-to-date performance for first half of fiscal 2024:

• SaaS revenue increased by 40 per cent to $23.6-million, up from $16.8-million in the same period of fiscal 2023.
• SaaS subscription bookings (k) (measured on an ARR (i) basis) decreased by 15 per cent to $5.7-million, compared with $6.7-million in the same period of fiscal 2023.
• Professional services revenue was up 2 per cent to $27.8-million, compared with $27.2-million in the same period of fiscal 2023.
• Total revenue, excluding hardware revenue, was $69.2-million, 12 per cent higher than $61.8-million reported for the same period of fiscal 2023, while total revenue rose 15 per cent to reach $83.5-million.
• Gross margin was 45 per cent for the first half of fiscal 2024, compared with 43 per cent for the same period in fiscal 2023.
• Total gross profit increased to $37.8-million, up 20 per cent from $31.4-million in the same period of fiscal 2023.
• Operating expenses increased to $36.5-million, higher by $6.2-million or 20 per cent compared with $30.3-million in the same period of fiscal 2023.
• Profit from operations was $1.4-million, up from $1.1-million in the same period of fiscal 2023.
• Net profit was $800,000 or six cents per fully diluted share, compared with $800,000 or five cents per share on a fully diluted basis for the same period in fiscal 2023.
• Adjusted EBITDA (ii) was $4.2-million, compared with $4.3-million reported in the same period of fiscal 2023.

"Despite a temporary dip in professional services revenue this quarter due to project schedulling and the swift growth of our partner ecosystem, we maintain a strong backlog," added Mr. Bentler. "We anticipate continued growth in professional services revenue and are adequately staffed to meet these demands. As a result of that temporary slowdown in professional services revenue, we are adjusting our short-term adjusted EBITDA outlook to provide a range, while affirming our adjusted EBITDA guidance for fiscal 2025 and our SaaS and total revenue growth guidance for fiscal 2024."

On Nov. 30, 2023, the company declared a quarterly dividend of eight cents per share, to be paid on Jan. 5, 2024, to shareholders of record on Dec. 14, 2023.

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

(i) See key performance indicators in the management's discussion and analysis of the Q2 2024 financial statements.

(ii) See non-IFRS performance measures in the management's discussion and analysis of the Q2 2024 financial statements.

Second quarter fiscal 2024 results conference call

Date:  Dec. 1, 2023

Time:  8:30 a.m. EST

Phone number:  877-224-7327 or 416-641-6705

The call can be replayed until Dec. 8, 2023, by calling 800-558-5253 or 416-626-4144 (access code 22028536).

About TECSYS Inc.

Since the company's founding 40 years ago, much has changed in the realm of supply chain technology. But one thing has remained constant; by developing dynamic and innovative supply chain solutions, TECSYS has been equipping organizations for growth and competitive advantage. Serving health care, distribution and converging commerce industries, and spanning multiple complex, regulated and high-volume markets, TECSYS delivers warehouse management, distribution and transportation management, supply management at point of use, and retail order management, as well as complete financial management and analytics solutions.

TECSYS's shares are listed on the Toronto Stock Exchange under the ticker symbol TCS.

Non-IFRS measures

Reconciliation of EBITDA and adjusted EBITDA

EBITDA is calculated as earnings before interest expense, interest income, income taxes, depreciation and amortization. Adjusted EBITDA is calculated as EBITDA before stock-based compensation, gain on remeasurement of lease liability and recognition of tax credits generated in prior periods. The exclusion of interest expense, interest income and income taxes eliminates the impact on earnings derived from non-operational activities, and the exclusion of depreciation, amortization, share-based compensation, gain on remeasurement of lease liability and recognition of tax credits generated in prior periods eliminates the non-cash impact of these items.

The company believes that these measures are useful measures of financial performance without the variation caused by the impacts of the items described above and that could potentially distort the analysis of trends in the company's operating performance. In addition, they 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. Excluding these items does not imply that they are necessarily non-recurring. Management believes these non-GAAP (generally accepted accounting principles) financial measures, in addition to conventional measures prepared in accordance with IFRS, enable investors to evaluate the company's operating results, underlying performance and future prospects in a manner similar to management. Although EBITDA and adjusted EBITDA are frequently used by securities analysts, lenders and others in their evaluation of companies, they have limitations as an analytical tool and should not be considered in isolation, or as a substitute for analysis of the company's results as reported under IFRS.

The reconciliation of EBITDA and adjusted EBITDA to the most directly comparable IFRS measure is provided in an attached table.

We seek Safe Harbor.