TECSYS Inc.
TSX : TCS

TECSYS Inc.

November 27, 2007 16:05 ET

TECSYS Operating Earnings Reach $993K in Q2 Generates $1.3M in Cash

MONTREAL, QUEBEC--(Marketwire - Nov. 27, 2007) - TECSYS Inc. (TSX:TCS), an industry-leading supply chain management software company announced today its results for the second quarter and first half of fiscal year 2008, ended October 31st, 2007. All dollar amounts are expressed in U.S. currency and reported in accordance with Canadian Generally Accepted Accounting Principles (GAAP) and are unaudited.

Highlights of the Second Quarter include:

- Total revenue increased by 29% to $9.7M in Q2 of fiscal 2008 from $7.6M in Q2 of fiscal 2007.

- Product revenue increased by 56% to $4.5M in Q2 of fiscal 2008 from $2.9M in Q2 of fiscal 2007.

- Services revenue increased by 13% to $5.0M in Q2 of fiscal 2008 from $4.4M in Q2 of fiscal 2007.

- Earnings from operations for the second quarter of fiscal 2008 were $993K compared to loss from operations of $644K for the same quarter of last fiscal year.

- EBITDA for Q2 of fiscal 2008 substantially improved to $749K compared to negative EBITDA of $411K for Q2 of fiscal 2007.

- Net earnings for the second quarter of fiscal 2008 were $427K or $0.03 per share after accounting for a foreign exchange loss of $327K and the $263K ABCP provision, compared to net loss of $691K or $0.05 per share for the second quarter of last fiscal year.

- Gross margin percentage increased to 49% in Q2 of fiscal 2008 compared to 36% in Q2 of last fiscal year. Gross margin improvement reflects an increase in gross margins of both products and services compared to the same period in last fiscal year.

- At the end of the quarter, backlog stood at $17.8M, up from $16.0M at the end of Q1 of this fiscal year.

- The Company generated $1.3M in cash from operations during the quarter.

The Company has taken a $263K provision against its ABCP holdings and is not accruing any interest against these holdings. This provision was calculated by using discounted cash flows and a combination of liquidity and credit risk factors using the information available to management at this time. The Company's ABCP holdings are all "Series A" and over 98% continue to be rated as "AAA", however, due to the continued scarcity of information, management cannot be more precise at this time."

Midway through the quarter, the Company changed its software license policy resulting in more rapid recognition of license revenue. In spite of this change, deferred license revenue increased during the quarter from $2.2M to $2.5M. This change is more fully explained in the MD&A.

Peter Brereton, President and CEO of TECSYS Inc. commented on the results: "Q2 was a great quarter. In spite of strong currency headwinds, we continued to see substantial gains in revenue and earnings with product revenue soaring 56%. We won several key new accounts and continued our growth in the heavy equipment market. The combination of continued investment from our customer base and these new account wins has resulted in the highest quarterly revenue and operating earnings in our company's history."

The Company signed four new customers, including:

- A major heavy equipment dealer in the state of Texas

- A manufacturer and distributor of fireplaces and accessories in Ontario

- A major wholesaler of hardware and renovation supplies in the state of Texas

- A large North American wholesaler of periodicals and books

For the six months ended October 31, 2007, revenue increased by 14% to $17.5M compared to $15.4M in the same period of the prior fiscal year. Earnings from operations for the first half of fiscal year 2008 were $1,134K compared to loss from operations of $900K in the same period of the prior fiscal year. After accounting for an exchange loss of $455K, net interest income of $97K and a provision for ABCP holdings of $263K, net earnings for the first half of fiscal year 2008 were $509K or $0.04 per share compared to net loss of $865K or $0.06 per share for the same period of the prior fiscal year.

TECSYS' Second Quarter, Fiscal 2008 Earnings Conference Call:



Date: November 27, 2007
Time: 4:30 pm
Phone number: 800-734-1279 or 416-620-9810
The call can be replayed by calling 800-558-5253 (access code: 21357447)
or 416-626-4100 (access code: 21357447).


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 800 mid-size and Fortune 1000 corporations in healthcare, giftware, office products, third-party logistics, and general wholesale high-volume distribution markets. 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, 2007. 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. 2007. 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 U.S. dollars)

October 31, April 30,
2007 2007
(unaudited) (audited)
---------------------------------------------------------------------------
---------------------------------------------------------------------------

Assets
Current assets
Cash and cash equivalents 4,794 4,058
Short-term and other investments - 2,509
Accounts receivable 7,827 6,242
Work in progress 525 271
Other accounts receivable 496 169
Tax credits receivable 1,654 983
Inventory 246 145
Prepaid expenses 833 500
---------------------------------------------------------------------------
16,375 14,877

Restricted cash equivalents and other investments 706 609
Asset-backed commercial paper 5,067 -
Long-term receivable 136 110
Long-term investment 481 257
Property and equipment, net 1,884 1,672
Intangible assets 1,307 1,385
Deferred development costs 894 672
Goodwill 2,410 2,068
---------------------------------------------------------------------------
29,260 21,650
---------------------------------------------------------------------------
---------------------------------------------------------------------------

Liabilities
Current liabilities
Bank advances 2,105 -
Accounts payable and accrued liabilities 5,577 4,367
Current portion of long-term debt 113 97
Deferred revenue 5,487 3,420
---------------------------------------------------------------------------
13,282 7,884

Shareholders' equity

Capital stock 37,073 38,188
Contributed surplus 7,876 7,293

Accumulated other comprehensive income 5,514 3,279
Deficit (34,485) (34,994)
---------------------------------------------------------------------------
(28,971) (31,715)
---------------------------------------------------------------------------
15,978 13,766
---------------------------------------------------------------------------

---------------------------------------------------------------------------
29,260 21,650
---------------------------------------------------------------------------
---------------------------------------------------------------------------



TECSYS Inc.
Consolidated Statements of Operations
Prepared in Accordance with Canadian Generally Accepted Accounting
Principles
---------------------------------------------------------------------------
(in thousands of U.S. dollars, except share and per share data)

Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
October 31, October 31, October 31, October 31,
2007 2006 2007 2006
(unaudited) (unaudited) (unaudited) (unaudited)
---------------------------------------------------------------------------
---------------------------------------------------------------------------

Revenue
Products 4,527 2,905 7,234 5,926
Services 4,969 4,396 9,850 8,921
Reimbursable expenses 236 266 457 544
---------------------------------------------------------------------------
9,732 7,567 17,541 15,391
Cost of revenue
Products 1,647 1,407 2,771 2,877
Services 3,052 3,161 6,088 6,125
Reimbursable expenses 236 266 457 544
---------------------------------------------------------------------------
4,935 4,834 9,316 9,546
---------------------------------------------------------------------------
Gross margin 4,797 2,733 8,225 5,845
---------------------------------------------------------------------------

Operating expenses
Sales and marketing 1,551 1,359 2,812 2,789
General and
administration 809 565 1,574 1,289
Gross research and
development 1,262 1,049 2,419 2,236
Research and development
tax credits (110) (46) (207) (152)
Deferred development
costs (53) (74) (145) (229)
Stock-based compensation 11 5 21 19
Amortization of property
and equipment 140 138 264 270
Amortization of
intangible assets 155 147 303 289
Amortization of
deferred development
costs 39 - 50 -
Restructuring charges - 234 - 234
---------------------------------------------------------------------------
3,804 3,377 7,091 6,745
---------------------------------------------------------------------------

Earnings (loss) from
operations 993 (644) 1,134 (900)

Interest income 23 25 101 102
Interest expense (1) (10) (4) (29)
Foreign exchange losses (327) (64) (455) (30)
Changes in fair value
of asset-backed
commercial paper (263) - (263) -
Share of net earnings
(loss) of a company
subject to significant
influence 2 2 (4) (8)
---------------------------------------------------------------------------
Earnings (loss) before
income taxes 427 (691) 509 (865)
---------------------------------------------------------------------------
---------------------------------------------------------------------------

Weighted average number
of common shares
outstanding
- basic 13,478,076 13,624,736 13,578,602 13,626,580
---------------------------------------------------------------------------
- diluted 13,495,069 13,624,736 13,603,391 13,626,580
---------------------------------------------------------------------------
Basic and diluted
net earnings
(loss) per common
share (in US
dollars) $0.03 $(0.05) $0.04 $(0.06)
---------------------------------------------------------------------------
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TECSYS Inc.
Consolidated Statements of Comprehensive Income
Prepared in Accordance with Canadian Generally Accepted Accounting
Principles
---------------------------------------------------------------------------
(in thousands of U.S. dollars)

Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
October 31, October 31, October 31, October 31,
2007 2006 2007 2006
(unaudited) (unaudited) (unaudited) (unaudited)
---------------------------------------------------------------------------
---------------------------------------------------------------------------


Net earnings (loss)
for the period 427 (691) 509 (865)

Other comprehensive
income (loss)
Translation
adjustment 1,706 105 2,235 (5)
---------------------------------------------------------------------------
Comprehensive
income (loss) 2,133 (586) 2,744 (870)
---------------------------------------------------------------------------



TECSYS Inc.
Consolidated Statements of Cash Flows
Prepared in Accordance with Canadian Generally Accepted Accounting
Principles
---------------------------------------------------------------------------
(in thousands of U.S. dollars)

Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
October 31, October 31, October 31, October 31,
2007 2006 2007 2006
(unaudited) (unaudited) (unaudited) (unaudited)
---------------------------------------------------------------------------
---------------------------------------------------------------------------

Cash flows from

Operating
activities
Net earnings (loss)
for the period 427 (691) 509 (865)
Adjustments for
Amortization of
property and equipment 140 138 264 270
Amortization of
intangible assets 155 147 303 289
Amortization of
deferred development
costs 39 - 50 -
Stock-based
compensation 11 5 21 19
Changes in fair
value of asset-backed
commercial paper 263 - 263 -
Unrealized foreign
exchange gains (232) (5) (130) (13)
Deferred development
costs (59) (75) (151) (229)
Share of net
(earnings) loss of
a company subject
to significant
influence (2) (2) 4 8

Changes in non-cash
working capital items
related to operations
(Increase) decrease
in accounts
receivable (166) 608 (500) (146)
Increase in work
in progress (34) (208) (69) (186)
Decrease in other
accounts receivable 32 16 22 11
Increase in tax
credits receivable (245) (154) (464) (343)
Increase in
inventory (51) (53) (65) (44)
Decrease (increase)
in prepaid expenses 27 (60) (231) 67
Increase (decrease)
in accounts payable
and accrued
liabilities 1,015 (910) 398 (924)
Increase (decrease)
in deferred revenue 28 193 1,178 (202)
---------------------------------------------------------------------------
1,348 (1,051) 1,402 (2,288)
---------------------------------------------------------------------------
Financing activities
Increase in bank
advances 2,051 - 2,051 -
Repayment of
long-term debt and
capital lease
obligations - (7) - (13)
Issuance of common
shares - 86 3 86
Purchase of common
shares for
cancellation (548) - (556) (66)
---------------------------------------------------------------------------
1,503 79 1,498 7
---------------------------------------------------------------------------
Investing activities
(Increase) decrease
in short-term and
other investments (4,538) 1,073 (2,698) 2,647
Acquisitions of
property and
equipment (128) (110) (205) (142)
Acquisitions of
intangible assets (1) (2) (24) (2)
Increase in long-term
receivable including
the current portion (3) (50) (33) (100)
---------------------------------------------------------------------------
(4,670) 911 (2,960) 2,403
---------------------------------------------------------------------------
Effect of foreign
exchange rate
fluctuations on cash
and cash equivalents 693 (2) 796 (10)
---------------------------------------------------------------------------
Change in cash and
cash equivalents (1,126) (63) 736 112
Cash and cash
equivalents
- Beginning of Period 5,920 1,355 4,058 1,180

---------------------------------------------------------------------------
Cash and cash
equivalents - End
of Period 4,794 1,292 4,794 1,292
---------------------------------------------------------------------------
---------------------------------------------------------------------------



TECSYS Inc.
Consolidated Statements of Shareholders' Equity
Prepared in Accordance with Canadian Generally Accepted Accounting
Principles
(Unaudited)
---------------------------------------------------------------------------
(in thousands of U.S. dollars)

Capital Stock Contributed Accumulated Deficit Total
Number Amount Surplus Other
Comprehensive
Income
---------------------------------------------------------------------------
Balance,
April 30,
2007 13,678,297 $38,188 $7,293 $3,279 $(34,994)$13,766

Repurchase
of common
shares (401,200) (1,120) 564 - - (556)

Stock
options
exercised 3,000 3 - - - 3

Fair value
associated
with
options
exercised - 2 (2) - - -

Stock-based
compensation - - 21 - - 21

Translation
adjustment - - - 2,235 - 2,235

Net earnings
for the
period - - - - 509 509

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Balance,
October
31, 2007 13,280,097 $37,073 $7,876 $5,514 $(34,485)$15,978
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