TECSYS Inc.

Good morning, everyone. Welcome to Texas's third quarter fiscal year 2024 results conference call. Please note that the complete third quarter report, including MD&A and financial statements, were filed on CDAR Plus after market close yesterday. All dollar amounts are expressed in Canadian currency and are prepared in accordance with international financial reporting standards. Thank you very much. Actual results may differ materially from such statements. I would like to remind everyone that this call is being recorded on Friday, March 1, 2024, at 8.30 a.m. Eastern Time. I would like now to turn the call over to Mr. Peter Brereton, Chief Executive Officer at Texas. Please go ahead, sir.

Thank you. Good morning, everyone. Joining me today is Mark Buntler, our Chief Financial Officer, and we appreciate you joining us for today's call. As our results posted yesterday highlight, our company has maintained a solid trajectory of growth this quarter, with a 48% increase in our SaaS revenue stream year over year, which Mark will elaborate on in a few minutes. We achieved $4.9 million in SaaS bookings for the quarter, marking our most successful quarter this fiscal year so far. Despite a year-over-year decline due to a lumpiness in post-COVID bookings last year, we are encouraged by the positive in-year trend. Our RPO has seen a steady rise, up 23% compared to the same time last year. We've also expanded our customer base, adding five new logos in the quarter and securing new business in the United States, Canada, Europe, and the Middle East. This includes three new health systems, major SaaS migrations, and a healthy mix of business across key verticals, underscoring our diversified capacity for sustained growth. I'd like to share some key highlights in Q3 and some context on how we see them supporting value creation. If you're following along on our companion presentation, I'll be speaking to slide three. First and foremost, we are seeing an across-the-board pickup in new business and buyer intent spanning diverse markets. Healthcare providers, video game distributors, online pharmacies, cosmetics retailers, and farm supply dealers have all invested in our platform in the quarter. This diversity is evidence of the growing awareness that the modern supply chain demands modern technology. In retail, our market position and presence continues to strengthen. We signed U.S.-based retailer Atwood's Ranch and Home. We've expanded our business with a global cosmetics retailer in a multi-country expansion. And we've extended our business with Crunchyroll, a Sony subsidiary. In healthcare, we continue to experience excellent momentum. Despite a general slowdown in the industry these past few years, with many hospitals experiencing negative cash flow until late 2023, most are now cash flow positive. We're seeing a rise in activity in our healthcare business. In addition to migration and expansion business at existing healthcare customers, we've welcomed three new health systems to our roster, among them a marquee name in the U.S., As we've noted in the past, every new logo carries years, if not decades, of expanding base account activity. Speaking of marquee names, this quarter we secured a significant expansion at Roche, one of the world's largest healthcare diagnostics companies, with operations in more than 100 countries. This new business bolsters our international presence and cements our standing as a key player in the global market. It also emphasizes the extensive capabilities of our solutions in handling the highly complex regulatory challenges of global logistics. As we have discussed in previous quarters and outlined in our guidance, we're committed to ongoing margin expansion. This quarter, our record revenue growth and operational efficiency improvements have positively influenced our profitability metrics. On top of that, early into Q4, we initiated a strategic restructuring to bolster our long-term profitability. Following the end of our Q3 and prior to the final approval of the financial statements, we reduced our workforce by about 4% across several departments, which, following severance costs of approximately $2.3 million, is anticipated to yield annual operating cost savings of approximately $4.6 million. Additionally, we are committed to strategically investing in areas with high growth potential to not only increase revenue but also to strengthen our competitive position in the markets we serve. Turning briefly to our leadership in the market, I'd like to take a moment to highlight some recent initiatives we have undertaken around market engagement since the Texas User Conference last quarter. As an example, we have proactively capitalized on substantial growth opportunities in the perioperative space, the pharmacy sector, and other sub-verticals to strengthen our market presence. Building on the strong partner engagement and customer enthusiasm from our User Conference, we've initiated a series of regional events, targeting these sub-verticals, including workshops and thought leadership forums. Partners, customers, and prospects have been coming together for learning and relationship building, while viewing Texas as a leading resource as they modernize their supply chain technology. This strategy is showing early signs of having a positive impact on our pipeline, which remains robust heading into Q4. I'll now hand it over to Mark to provide further details on our third quarter financial results as well as financial guidance on several key metrics.

Thanks, Peter. We're very pleased with the record performance in our third quarter and at January 31st, 2024. I'll start with slide four and focus first on SaaS. SaaS continues to be the key driver for our growth and we believe the key driver for value creation. SaaS revenue growth is driving our recurring revenue and during the third quarter, our recurring revenue was 52% of total revenue and 63% of total non-hardware revenue. Reported SAS revenue growth in Q3 of fiscal 2024 was 48%, reaching $14.2 million in the quarter. That 48% growth number was stellar, but it was also helped by about three percentage points of tailwind from foreign exchange and about seven percentage points of tailwind from one-time recognition of deferred revenue related to the completion of a product performance obligation. This was also called out in our MD&A. I just wanted to highlight those points to help you triangulate our year-to-date reported SAS revenue growth number of 43% to our revised, slightly upward SAS revenue guidance range for the full year of 37% to 38%. I'll speak a bit more about our financial guidance in a moment. Total revenue for the quarter was a record $43.8 million. That's 13% higher than the same period last year. On a constant currency basis, total revenue growth was 10%. I'm going to come back to professional services revenue on the next slide, but first I want to point out the significant decline here in license revenue, which was down about $0.7 million compared to Q3 of last year. This is really the back end of our transition to SAS, and soon we'll have very little comparative adjusted EBITDA drag from license revenue. For the third quarter, gross margin was 45% compared to 44% in the same period last year. Combined SAS, maintenance, support, and professional services gross profit for the three months ended January 31, 2024 was 48%. That's up compared to 47% in the same period of fiscal 23. SAS margin expansion was the driver, and we're pleased to report that this continues to track as planned. Net profit in the quarter was relatively flat at $759,000 compared to $888,000 in the same quarter last year. Adjusted EBITDA was $2.6 million in Q3 fiscal 24 compared to $2.8 million in the same period last year. Relative to the third quarter fiscal 23, despite solid growth in our SAS business, lower professional services and license revenue negatively impacted current quarter profitability, which is a good transition to slide five. Professional services revenue for the third quarter was $13.0 million. That was actually down 4% from $13.6 million reported for the same quarter last year, and up only slightly on a sequential basis from Q2. Professional services backlog continues to be strong at $36.7 million at January 31, 2024. As we indicated last quarter, we expect professional services revenue to tick up sequentially in Q4 as we see project activity increasing. Turning now briefly to our results for the first nine months, of our fiscal year 2024. Our total revenue was 127.3 million. That's up 14% compared to 111.2 million in the same period last year. And that's up 11% on a constant currency basis. SAS revenue for the first nine months of fiscal 24 was 37.7 million. That's up 43% from 26.3 million in the same period last year and up 39%. on a constant currency basis. Our adjusted EBITDA for the first nine months of fiscal 24 was $6.8 million compared to 7.0 in the same period last year. Basic and fully diluted earnings per share were 11 cents in the first nine months of both fiscal 24 and fiscal 23. We ended Q3 fiscal 2024 with a solid balance sheet position. We had cash and short-term investments of 33.2 million and no debt. Q3 net cash provided by operating activities was $2.3 million. And during the quarter, we used $1.5 million to repurchase shares under our NCIB. Additionally, the board yesterday approved a quarterly dividend of $0.08 a share. Well, with respect to financial guidance, and now moving to slide six, based on our Q3 results and our Q4 outlook, we are revising full year 2024 guidance to, number one, tighten the range on total revenue growth to between 11% and 14%. Number two, tighten the range and increase the high end of SAS revenue growth to between 37% and 38%. And number three, tighten the range on short-term adjusted EBITDA margin to between 5% and 6%. We expect to provide updated guidance for fiscal 2025 as part of our Q4 and full-year fiscal 2024 earnings call. I'll now turn the call back to Peter to provide some outlook comments.