TECSYS Inc.
TSX : TCS

TECSYS Inc.

February 25, 2010 14:08 ET

TECSYS Announces Q3, 2010 Results: Proprietary Product Sales up 11% YTD

MONTREAL, QUEBEC--(Marketwire - Feb. 25, 2010) - TECSYS Inc. (TSX:TCS), an industry-leading supply chain management software company, announced today its results for the third quarter of fiscal year 2010, ended January 31st, 2010. All dollar amounts are expressed in Canadian currency and reported in accordance with Canadian Generally Accepted Accounting Principles (GAAP) and are unaudited.

Highlights of the Third Quarter include:

- Revenue was $8.8M in Q3, 2010 compared to $9.6M in Q3, 2009; the reduction was primarily due to the weakening of the U.S. Dollar which impacted revenue by $750K.

- Gross margin increased to 44% in Q3, 2010 from 42% in Q3, 2009

- Earnings from operations for Q3, 2010 were $142K compared to $329K in Q3, 2009.

- EBITDA for Q3, 2010 was $458K compared to $480K for Q3 of last fiscal year.

- Net earnings for the third quarter, 2010 were $62K or $0.00 per share compared to $97K or $0.01 per share for the third quarter of last fiscal year. Net earnings for the quarter were achieved after accounting for interest expense of $6K, foreign exchange losses of $27K and a share of net loss and amortization of intangible assets of $47K from a company in which TECSYS has an equity interest.

- Annualized return-on-equity was equal to 1.5% in Q3, 2010 compared to 2.5% in Q3 of last fiscal year.

- At the end of Q3, 2010 annualized recurring revenue in Canadian currency was $13.2M compared to $13.4M at the end of Q3, 2009; this drop is due to currency fluctuations. USD denominated recurring revenue increased by $672K or 12% while CAD denominated recurring revenue was flat. Recurring revenue is principally made-up of annual software maintenance contracts.

- At the end of Q3, 2010, backlog stood at $17.8M compared to $17.9M at the end of Q2, 2010.

- During the quarter, the Company generated $617K cash from operations. Cash, cash equivalents and other short-term investments amounted to $7.5M at the end of Q3, 2010, the same as at the end of Q3, 2009 with no significant long-term debt.

Peter Brereton, President and CEO of TECSYS Inc., commented on the results: "The success of our vertical strategy continues to benefit the business with YTD proprietary product sales being up 11% and demand for customization services and third party products being down resulting in higher gross margins and a more scalable business. With more than 50% of our revenue generated in the United States, Q3 was significantly impacted by the weaker U.S. Dollar and by the slower than usual decision making. Prospects and clients are taking extra time in this tight economy to finalize their decisions, but our pipeline is significantly more active than it has been since 2008. Our client base continued to invest in our solutions and services, culminating in a number of new agreements and our services' organization completed fifteen go-lives during the quarter."

During the quarter, the Company signed a number of agreements with existing clients and new customers including:

- Three healthcare products distributors

- Three import-to-retail distributors

- One major third party logistics services provider to a major healthcare products manufacturer

- An ecommerce site for tropical retail goods and services

- Five office products distributors

- Eight industrial distributors

Furthermore, TECSYS also deployed its supply chain execution solutions at fifteen customer sites, three of which were in healthcare, five in high-volume distribution for mid to large size clients and seven in the SMB sector.

Year-to-date, fiscal 2010 Highlights include:

- Revenue for the first nine months, 2010 was $27.9M compared to $30.6M for the same period of last fiscal year due to a decrease in hardware sales. However, the Company's proprietary product revenue in the first nine months, 2010 increased by $479K or 11% compared to the same period in last year.

- Earnings from operations for the first nine months, 2010 were $1,255K compared to $1,366K for the same period in last fiscal year.

- EBITDA for the first nine months, 2010 was $2,032K compared to $2,155K for the same period in 2009.

- Net earnings for the first nine months, 2010 were $916K or $0.07 per share compared to $1,015K or $0.08 per share for the same period of the prior fiscal year. Net earnings for the first nine months were achieved after accounting for net interest expense of $4K, foreign exchange losses of $221K and a share of net loss and amortization of intangible assets of $96K from a company in which TECSYS has an equity interest.

- Annualized return-on-equity was equal to 7.6% in the first nine months of fiscal 2010 compared to 8.7% for the same period in last fiscal year.

TECSYS' Third Quarter 2010 Earnings Conference Call:



Subject: Third Quarter FY2010 Results Conference Call
Date: February 25, 2010
Time: 4:30 pm
Phone number: 800-926-9761 or 416-981-9007


The call can be replayed by calling 800-558-5253 (access code: 21460321) or 416-626-4100 (access code: 21460321).

About TECSYS

TECSYS is a leading supply chain management software provider that delivers powerful enterprise distribution, warehouse and transportation logistics software solutions. The company's customers include about 600 mid-size and Fortune 1000 corporations in healthcare, heavy equipment, 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, 2009. 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 (C) TECSYS Inc. 2010. All names, trademarks, products, and services mentioned are registered or unregistered trademarks of their respective owners.




TECSYS Inc.
Consolidated Balance Sheets
Prepared in Accordance with Canadian Generally Accepted Accounting
Principles

--------------------------------------------------------------------------
(in thousands of Canadian dollars)
January 31, April 30,
2010 2009
(unaudited)
------------ ----------
------------ ----------
Assets
Current assets
Cash and cash equivalents 7,224 7,510
Short-term and other investments 325 325
Accounts receivable 8,045 9,307
Work in progress 100 303
Other accounts receivable 92 198
Tax credits receivable 2,390 1,536
Inventory 207 219
Prepaid expenses 803 668
------------ ----------
19,186 20,066
Restricted cash equivalents and other investments 940 739
Asset-backed commercial paper 3,516 3,535
Long-term receivables 61 77
Long-term investment 194 290
Property and equipment 1,391 1,481
Intangible assets 596 930
Deferred development costs 1,868 1,519
Goodwill 2,829 2,829
------------ ----------
30,581 31,466
------------ ----------
------------ ----------
Liabilities

Current liabilities
Bank advances 3,969 4,000
Accounts payable and accrued liabilities 4,119 5,154
Current portion of long-term debt 250 133
Deferred revenue 6,104 6,249
------------ ----------
14,442 15,536
------------ ----------
Long-term debt - 100
------------ ----------
14,442 15,636
------------ ----------
Shareholders' equity
Capital stock 1,397 1,420
Contributed surplus 12,054 12,328
Retained earnings 2,688 2,082
------------ ----------
16,139 15,830
------------ ----------

30,581 31,466
------------ ----------
------------ ----------



TECSYS Inc.
Consolidated Statements of Earnings and Comprehensive Earnings
Prepared in Accordance with Canadian Generally Accepted Accounting
Principles

---------------------------------------------------------------------------
(in thousands of Canadian dollars, except share and per share data)

Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
January 31, January 31, January 31, January 31,
2010 2009 2010 2009
(unaudited) (unaudited) (unaudited) (unaudited)
-----------------------------------------------------
-----------------------------------------------------
Revenue
Products 2,774 3,140 9,866 12,102
Services 5,740 6,222 17,240 17,664
Reimbursable expenses 286 287 819 831
-----------------------------------------------------
8,800 9,649 27,925 30,597
Cost of revenue
Products 1,203 1,550 3,535 5,891
Services 3,482 3,789 10,781 11,222
Reimbursable expenses 286 287 819 831
-----------------------------------------------------
4,971 5,626 15,135 17,944
-----------------------------------------------------
Gross margin 3,829 4,023 12,790 12,653
-----------------------------------------------------
Operating expenses
Sales and marketing 1,376 1,502 4,267 4,664
General and
administration 806 770 2,744 2,485
Gross research and
development 1,589 1,409 4,614 4,024
Research and
development tax
credits (262) (129) (609) (418)
Deferred development
costs (229) (262) (621) (643)
Stock-based
compensation 32 32 92 94
Amortization of
property and
equipment 153 133 401 398
Amortization of
intangible assets 131 167 375 537
Amortization of
deferred development
costs 91 72 272 146
-----------------------------------------------------
3,687 3,694 11,535 11,287
-----------------------------------------------------
Earnings from
operations 142 329 1,255 1,366
Interest income 2 10 14 48
Interest expense (8) (6) (18) (61)
Foreign exchange
losses (27) (86) (221) (163)
Changes in fair value
of asset-backed
commercial paper - (123) - (123)
Share of net loss and
amortization of
intangible assets of
a company subject to
significant influence (47) (27) (96) (52)
-----------------------------------------------------
Earnings before income
taxes 62 97 934 1,015
-----------------------------------------------------
-----------------------------------------------------
Income taxes - - 18 -
-----------------------------------------------------
Net earnings and
comprehensive
earnings for the
period 62 97 916 1,015
-----------------------------------------------------
-----------------------------------------------------
Weighted average
number of common
shares outstanding
- basic 12,341,102 12,699,887 12,395,115 12,844,652
-----------------------------------------------------
- diluted 12,568,344 12,699,996 12,571,301 12,851,358
-----------------------------------------------------
Basic and diluted net
earnings per common
share $ - $ 0.01 $ 0.07 $ 0.08
-----------------------------------------------------
-----------------------------------------------------



TECSYS Inc.
Consolidated Statements of Cash Flows
Prepared in Accordance with Canadian Generally Accepted Accounting
Principles

---------------------------------------------------------------------------
(in thousands of Canadian dollars)

Three Three Nine Nine
Months Months Months Months
Ended Ended Ended Ended
January 31, January 31, January 31, January 31,
2010 2009 2010 2009
(unaudited) (unaudited) (unaudited) (unaudited)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Cash flows from
Operating activities
Net earnings for the
period 62 97 916 1,015
Adjustments for
Amortization of
property and equipment 153 133 401 398
Amortization of
intangible assets 131 167 375 537
Amortization of
deferred development
costs 91 72 272 146
Stock-based
compensation 32 32 92 94
Changes in fair value
of asset-backed
commercial paper - 123 - 123
Unrealized foreign
exchange losses
(gains) 137 (343) 17 700
Deferred development
costs (229) (262) (621) (643)
Share of net loss and
amortization of
intangible assets of a
company subject to
significant influence 47 27 96 52
----------- ----------- ----------- -----------
424 46 1,548 2,422
Changes in non-cash
working capital items
related to operations
Decrease (increase) in
accounts receivable 1,220 946 1,262 (598)
Decrease (increase) in
work in progress 131 250 203 (19)
(Increase) decrease in
other accounts
receivable (5) (4) 3 60
(Increase) decrease in
tax credits receivable (391) 651 (854) 222
Decrease (increase) in
inventory 3 (170) 12 (182)
Decrease (increase) in
prepaid expenses 33 167 (135) 108
Decrease in long-term
receivables - - - 58
Decrease in accounts
payable and accrued
liabilities (292) (773) (1,035) (332)
(Decrease) increase in
deferred revenue (506) 509 (145) 1,130
----------- ----------- ----------- -----------
617 1,622 859 2,869
----------- ----------- ----------- -----------
Financing activities
Bank advances (9) - (31) (3)
Purchase price
adjustments on
acquisition applied
against long-term debt 17 (133) 17 (174)
Issuance of common
shares - - - 20
Purchase of common
shares for
cancellation (100) (104) (389) (480)
Dividends paid on
common shares - - (310) (255)
----------- ----------- ----------- -----------
(92) (237) (713) (892)
----------- ----------- ----------- -----------
Investing activities
Increase in short-term
and other investments
and restricted cash
equivalents and
other investments - (4) (201) (27)
Interest and principal
received on asset-
backed commercial
paper 29 167 124 167
Acquisitions of
property and equipment (131) (16) (311) (222)
Proceeds on disposal of
property and equipment - - - 8
Acquisitions of
intangible assets (5) (50) (41) (135)
Proceeds on disposal of
intangible assets - - - 7
Decrease (increase) in
long-term receivables
including the current
portion from
a related party 16 13 (3) 37
----------- ----------- ----------- -----------
(91) 110 (432) (165)
----------- ----------- ----------- -----------
Variation in cash and
cash equivalents 434 1,495 (286) 1,812
Cash and cash equivalents
- beginning of period 6,790 6,010 7,510 5,693
----------- ----------- ----------- -----------
Cash and cash equivalents
- end of period 7,224 7,505 7,224 7,505
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------



TECSYS Inc.
Consolidated Statements of Shareholders' Equity
Prepared in Accordance with Canadian Generally Accepted Accounting
Principles

---------------------------------------------------------------------------
(in thousands of Canadian dollars, except number of shares)
(unaudited)
Common shares Contributed Retained
Number Amount surplus earnings Total
---------------------------------------------------------------------------
Balance, April 30,
2009 12,525,884 1,420 12,328 2,082 15,830
Repurchase of common
shares (207,340) (23) (366) - (389)
Stock options
exercised 281 - - - -
Stock-based
compensation - - 92 - 92
Net earnings for the
period - - - 916 916
Dividends - - - (310) (310)
Balance, January 31,
2010 12,318,825 1,397 12,054 2,688 16,139
---------------------------------------------------------------------------
---------------------------------------------------------------------------

Common shares Contributed Retained
Number Amount surplus earnings Total
---------------------------------------------------------------------------
Balance, April 30,
2008 13,003,684 1,444 12,826 1,003 15,273
Repurchase of common
shares (350,300) (39) (441) - (480)
Stock options
exercised 12,500 20 - - 20
Fair value
associated with
options exercised - 10 (10) - -
Stock-based
compensation - - 94 - 94
Net earnings for the
period - - - 1,015 1,015
Dividends - - - (255) (255)
Balance, January 31,
2009 12,665,884 1,435 12,469 1,763 15,667
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