TECSYS Inc.

Everyone, welcome to the Texas Third Quarter Fiscal 2022 Results Conference Call. Please note that the complete third quarter report, including M, D, and A financial statements, were filed on CDAR yesterday. All dollar amounts are expressed in Canadian currency and are prepared in accordance with international financial reporting standards. Some of the statements in this conference call, including the question and answers period, may include forward-looking statements that are based on management's beliefs and assumptions. Actual results may differ materially from such statements. I would like to remind everyone that this call is being recorded on Thursday, March 3, 2022, 8.30 a.m. ET. I would now like to turn the conference over to Mr. Peter Brereton, Chief Executive Officer at Texas. Please go ahead, sir.

Thank you. Good morning, everyone. Joining me today is Mark Bentley, our Chief Financial Officer. We appreciate you joining us for today's call. In the third quarter, we delivered excellent results, fueled by strong demand for our solutions and the continued success of our transformation. Our customers are not only... Pardon me, staying with us. They are growing with us and transforming their own businesses. In Q3, I'm thrilled to say that we continue to deliver another great quarter with double digit ARR growth, solid backlog and a strong pipeline across all industries. We continue to solidify our mission of equipping our customers with supply chain excellence. Although we did experience some delayed projects due to Omicron, I'm very proud of the work our team did by closing of the quarter strong, expanding on the depth and breadth of our platform and as always, investing in our people and culture. Today, I'll start by providing some additional color on the results, and Mark will walk us through the financial results in more detail. And finally, I'll share what I'm looking forward to this year and beyond. We'll follow that up with a Q&A session. There are two key indicators that I'd like to highlight, which despite currency headwinds, are contributing to our track record of solid growth. Revenue, where I'll touch on growth and quality, and our pipeline, where I'll touch on market conditions. First, it's important to note that we have had consistent consecutive growth on a quarterly basis for the last three years. As we continue to emphasize, SaaS revenue is scaling up relatively quickly due to our ongoing strategic shift to SaaS in all of our markets. As we continue to mature this SaaS revenue model, we will increasingly create greater revenue visibility and improve the long-term quality of our revenue. This leads to my second point, our pipeline. This strong revenue performance is fueled by the continued strength of our pipeline. Companies in every sector are working diligently to digitize their supply chain to maintain competitive advantage, and we are there for them. If the last few years have taught us anything, it's that the supply chain is absolutely critical. Companies are now taking this knowledge and bolstering technology to become nimbler in the face of new potential future uncertainties, and we are seeing the effect of that trend not only with new prospects, but the growth and utilization from our existing base of customers. With that said, we continue to invest in innovative solutions to further drive benefit to our customers, and we've realized a significant milestone in the introduction of an AI-driven augmented cluster building application at our customer Werner Electric. This application intelligently groups together picks of various orders and simulates multiple pick paths and then chooses the optimal combination to reduce travel time and boost efficiency. We expect to see a 15 to 20% cost saving just in travel distance alone. We believe this to be very timely as our customers continue to be challenged with labor shortages. As we mature our AI strategy, we see ample opportunity to take full advantage of the data our system generates to create customer value. Our momentum is strong, and to maintain this, we realize the people of Texas are the most critical asset we have, and we are allocating higher expenses for retention as well as recruiting efforts in attracting new employees. Mark will now provide further details on our financial results for the third quarter and the first nine months of our fiscal year.

Thanks, Peter. As indicated at the beginning of the call, our financials and MD&A are available on CDAR. I'll focus my summary here just on a few of our key metrics and areas where I will provide some additional color. We're pleased with our strong performance in our third quarter ended January 31st, 2022. Total revenue was a record $35.4 million, 11% higher than $31.9 million reported for Q3 of 2021. As many of you know, a significant portion of our revenue, about 65%, is denominated in U.S. dollars. As a result, movement in currency exchange rates has an impact on our reported revenue and growth. During Q3 fiscal 2022, currency exchange movements negatively impacted our reported revenue as the value of the U.S. dollar was weaker compared to the same quarter last year. In fact, on a constant currency basis using fiscal 2022 currency rates, our third quarter revenue grew by about 16% compared to the same quarter last year. We continue to experience strong and diverse revenue streams underpinned by a 49% increase in SAS revenue, which was up from 4.7 million in Q3 2021 to 7.0 million in Q3 2022. On a constant currency basis, SAS revenue was up about 56%. I also want to note again that we're at the precipice of a significant milestone in our transition as a SAS business, with our SAS revenue currently representing 46% of our total recurring revenue streams in Q3 fiscal 2022. And we have line of sight to SAS crossing over the 50% threshold within a matter of months. That's about a three-year timeframe into our SAS transition. Our annual recurring revenue at January 31, 2022 was $59.5 million, up 17% from $50.8 million at January 31, 2021. On a constant currency basis, that increase was about 19%. Professional services revenue for the third quarter was $12.9 million, up 5% from $12.3 million reported for the same quarter last year. Again, currency movements created headwind on revenue growth here, which would have been 9% on a constant currency basis. Moving on to bookings in the quarter, SAS bookings are reported on an annual recurring revenue basis and increased by 133% to 2.3 million in Q3 2022 compared to Q3 2021, which was at 1.0. Bookings were highlighted by the addition of a new hospital network as well as significant base business from our customers across all verticals. We also signed another new hospital network in the first days of Q4. Professional services bookings were 9.3 million, down 11% compared to 10.5 million in the same quarter last year. We had some professional services bookings slip into Q4, about 4 million signed in the first few weeks of Q4. This highlights, again, the lumpiness and impact of timing on reported quarterly bookings. We still like this as a metric because, over time, we believe it provides a good leading indicator of business performance and growth prospects. SAS remaining performance obligation, also known as RPO or SAS backlog, was $78.5 million at the end of Q3 fiscal 2022, up 36%. from 57.6 million at the same time last year. On a constant currency basis, that growth was 37%. SAS backlog was up 8% sequentially compared to the second quarter of fiscal 2022. That's 6% constant currency. The increase was driven by significant multi-year SAS bookings during the quarter. Professional services backlog at the end of Q3 fiscal 22 was 29.5 million That's down about 22% compared to 37.8 million at the same time last year, and down from 33.1 million at October 31st, 2021. As noted above, timing, especially on large deals, can have a pretty significant impact on reported backlog at any point in time. Our professional services backlog remains robust, and we expect our delivery team to continue to be very busy in the quarters ahead. For the third quarter, total gross profit was $15.2 million. That's down $0.2 million compared to $15.4 million in Q3 of 21. As a percentage of revenue, gross margin was 43% compared to 48% the same quarter last year. That decline was a result of unfavorable exchange movements, changes in the revenue mix, and investment to support growth. Net profit for the quarter was $0.9 million, or $0.06 per fully diluted share, compared to $1.8 million in Q3 last year, which was $0.12 per fully diluted share. Adjusted EBITDA was $2.7 million in Q3 2022, compared to $4.0 million in Q3 2021. The decrease in profit in adjusted EBITDA compared to the third quarter last year was primarily due to an unfavorable foreign exchange impact. of approximately $1.6 million. Turning now very briefly to our results for the first nine months of our fiscal 2022, our total revenue was $102.9 million, up 13% compared to $90.7 million in the same period last year, and that's up 19% on a constant currency basis. SAS revenue for the first nine months of fiscal 22 was $19.2 million, up 41%. from 13.7 million in the same period last year. And that's up 49% on a constant currency basis. Our SAS bookings are up 23% compared to the first nine months of last fiscal year. Our profit for the first nine months of fiscal 22 was 1.9 million or 13 cents per fully diluted share compared to 5.2 million or 35 cents per fully diluted share in the same period last year. Adjusted EBITDA was $8.4 million in the first nine months of the current fiscal year compared to $12.3 million for the same period last year. Foreign exchange movements had a negative impact of approximately $4.6 million on profit in adjusted EBITDA in the current nine-month period compared to the same period last year. We ended the third quarter with a strong balance sheet position at January 31st, 2022. We had cash and cash equivalents in short-term investments of $36.9 million compared to $45.9 million at year-end. And we had debt of $8.7 million compared to $9.6 million at year-end. Cash provided by operations was $0.9 million in Q3, and our DSOs, or days sales outstanding and accounts receivable, remained reasonable at 58. versus 47 at year end and 45 at the same time last year. Recall that our Q4, so that's next quarter for us, tends to be a high point for cash from operations due to some seasonality in our non-cash working capital, in particular related to annual tax credit refunds. I'll now turn the call back over to Peter to provide some outlook comments.