TECSYS INC. - TSX: TCS 2012 FOURTH QUARTER RESULTS FINANCIAL ANALYSTS CALL INTRODUCTIONS: FRIDAY JULY 6, 2012, 4:30 P.M. EDT Good afternoon, ladies and gentlemen! Welcome to our presentation. Joining me for this conference call is Berty Ho, our CFO. In this presentation we will announce the financial results and cover the key business highlights of the fourth quarter and fiscal year 2012. At the end of the presentation we will have a question and answer period for the analysts and media. Please note that the annual financial results are audited and that all dollar amounts are expressed in Canadian currency and are prepared in accordance with the International Financial Reporting Standards (IFRS). Some of the statements in this conference call relate to matters that are not historical fact, but which 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, and other factors beyond the control of TECSYS Inc., which could cause actual results to differ materially from such statements. Overview: I am pleased to report that we have had a great quarter in terms of growth in Q4 of fiscal 2012. We made the most of our new product introductions and positive market position, as we executed well against our strategy in a favourable market climate as decision makers are actively investing in their distribution infrastructure. We won the business of nine new customers and our customer base invested significantly in our solutions. License revenue soared; up 130% compared to Q4 of last year. We also achieved revenue growth in services and posted earnings of four cents per share. 1
Now turning to the Remaining highlights of the quarter: Revenue for the fourth quarter of fiscal 2012 increased by 27% to $10.8 million from $8.5 million in Q4 of last year. As a percentage of total revenue, products accounted for 42% while 56% came from services including consulting, recurring maintenance fees and hosting services delivered during the quarter. Product revenue increased by 79% to $4.5 million in Q4 of 2012 from $2.5 million in Q4 of last year. Proprietary license revenue contributed the highest increase up 130% to $3.0 million from $1.3 million for the same period in fiscal 2011. Profit from operations in Q4, 2012 was $735K compared to $674K in the same quarter of last year. Q4, 2012 was heavily impacted by our investment of about $1.0M in increasing our headcount in Services and R&D. This will more closely align billable capacity with business booked and new business run-rate. EBITDA for the quarter was $1,273K compared to $1,061K in Q4 of last year. Net profit was $473K or $0.04 per share compared to $491K or $0.04 per share in Q4 of last year. In terms of the financial highlights for the 2012 fiscal year, revenue increased by 11% to $39.5M compared to $35.7M for last fiscal year. Product revenue increased by 17% to $14.6M in 2012 compared to $12.5M in 2011, with the Company s proprietary license revenue increasing by 25% to $7.3M in 2012 compared to $5.8M last year. Services revenue increased by 8% to $24.1M in 2012 compared to $22.3M in the last fiscal year. Profit from operations for the year was $1.5M, the same as last fiscal year. FY2012 was significantly impacted by our investment of about $2.0M in increasing Services and R&D by about 50 out of total headcount additions of about 56 in fiscal year 2012. 2
EBITDA reached $3.1M in 2012 compared to $3.2M in fiscal 2011, with net profit for the year of $1.1M or $0.09 per share compared to $1.6M or $0.13 for 2011. Included in last years net income was a pickup of $302K from the revaluation of our Asset-Backed Commercial Paper. From a liquidity stand point, we continued to generate cash, generating over $1.6 million cash from operations during the year. Our balance sheet continues to be strong. Cash and cash equivalents, as well as short-term and other investments at the end of Q4, 2012 amounted to $5.2M compared to $7.3M at the end of Q4, 2011, mostly due to our capital investments in our facility in Markham, as well as our NCIB and option buy-back activities. Business Highlights: In terms of business highlights, this was an exceptional quarter as we won the business of nine new clients. They include: Two heavy equipment dealers; one in the U.S. and one in South America The Canadian operations of a global heavy equipment manufacturer and distributor Canada's largest distributor of value-priced greeting cards One of the largest distributors of electronic components Four industrial distributors; two in Canada and two in the U.S. Furthermore, we signed a significant number of new agreements with existing customers across our business units with business bookings from the healthcare industry contributing 50% to our bookings in the quarter. We also deployed our supply chain execution solutions at twenty three customer sites across all of our vertical markets in Canada and the United States. In addition to the increased go-lives, demand from our clients grew at a steep rate and has resulted in an all-time-high backlog of $26.3 million. 3
That concludes our review of the fourth quarter and fiscal year 2012. Now I would like to comment on a couple of key highlights: Complex distribution continues to be a strategic focus for TECSYS. For example, during the quarter we won the business of one of the largest and fastestgrowing electronic component distributors. This new customer differentiates itself through the breadth and quality of products it offers and their commitment to over 95% fill rate in an industry where the average is 50% or less. To support this high-level of fulfilment, they have selected our Warehouse Management, Business Intelligence and visibility tools to automate their massive supply chain execution operation of several hundred thousand products and customers worldwide. We are delighted with this win; it is a true testimony to our robust solutions in such a demanding environment. Also in complex distribution, the continued resurgence of the heavy equipment service parts market was evident during the quarter. In Q3, as you may recall, we won the business of two accounts in this sector, and I am delighted that this resurgence continued in Q4 with the win of three additional services parts distribution operations. A highlight of the quarter was the win of a South American heavy equipment dealer; over a billion dollar business serving such industries as mining, construction, energy, transportation and agriculture. Their service parts operation is complex and substantial, carrying over 40,000 items in stock and processing over 10,000 orders per month. To sustain a high-level of customer service, their management decided in favour of our warehouse management system to replace an existing one that is not fulfilling their needs. This is our first South American customer in the heavy equipment industry; we look forward to making their operation as efficient as the rest of our customers in this sector. On the Healthcare front, our customers, both hospital networks and distribution organizations in biotech, med-surg and pharmaceutical products distribution continued to invest significantly in our software and services; eight of them were active during the quarter. The most notable one is the signing of a significant 4
agreement with an existing customer, a Fortune 100 healthcare supplier that helps their customers focus on patient care while reducing costs, enhancing efficiency and improving quality. We are pleased with our healthcare customers continuing trend of investing in our products and service. In summary: Q4 was a remarkable quarter; we have achieved profitable revenue growth of 27% with our proprietary license revenue increasing by an exceptional 130% compared to last year. We deployed our solutions at twenty three customer sites and grew services revenue by 6% compared to last year. We also continued to strengthen our services infrastructure to accelerate delivery of our growing backlog. At the end of Q4, 2012, annualized recurring revenue reached $14.8M, or 37% of 2012 revenue. Backlog increased to $26.3M at the end of Q4, 2012, compared to $21M at the end of Q4, 2011. We are pleased with our current market position and the opportunities ahead; we look forward to making the most of these opportunities moving forward. That concludes our presentation.thank you for your attention, we will now open it up for questions 5