TECSYS Inc.

Good morning, everyone. Welcome to Texas' third quarter fiscal year 2025 results conference call. Please note that the complete third quarter report, including MD&A and financial statements, were filed on Cedar Plus after market close yesterday. All dollar amounts are expressed in Canadian currency and are prepared in accordance with international financial reporting standards. The company has added a companion presentation to today's call, which is available on their website at www.texas.com slash investors. Some of the statements in this conference call, including the question and answer 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 6, 2025, at 8.30 a.m. Eastern Time. I would now like to turn the conference over to Mr. Peter Brereton, Chief Executive Officer at Texas. Please go ahead, sir.

Thank you, and good morning, everyone. Joining me today is Mark Butler, our Chief Financial Officer. We appreciate you joining us for today's call. We continue to see strong SaaS revenue growth, up 29% year-to-date and up 22% for the quarter, which together with other revenue streams, including professional services, contributed to a record revenue quarter of over $45 million. Meanwhile, SaaS bookings were diversified across markets and geographies, and we saw continued positive growth in our RPO, now sitting at $210 million. Between new logos, renewing and expanding base accounts, and continued migration momentum, We are seeing sustained indicators of business health, reflecting steady progress toward our long-term value creation goals. I'd like to take a moment to summarize the key events of Q3 for fiscal 25. Mark will then walk us through the financial results in more detail. And finally, I'll comment on our outlook, followed by a Q&A session. If you're following along on our companion presentation, I'll be speaking to slide three. Our third quarter builds on solid fiscal performance to date. We're looking at record quarter and year-to-date total revenue and SAS revenue, solid bookings at $4 million for the quarter, which, while down compared to Q3 last year, is up 31% on the last 12 months' basis, and a strong adjusted EBITDA, up 34% compared to last year. Our performance this quarter reflects strong business activity with notable momentum in health care. This includes two new health system wins, one in the U.S. and one in Canada. We also added another U.S. health system a few days after quarter end We signed two major migration deals across healthcare distribution and health systems, as well as various expansion deals as we continue to show value once we are into an account. We continue to see growing demand for our pharmacy solutions with healthy pipeline activity driven by general market appetite, DSCSA regulatory pressures, and a growing Rolodex of Texas customers who are looking at their pharmacy operations as a next strategic focus. Over the past few quarters, I've mentioned our focus on expanding user groups and industry workshops. This effort is showing excellent momentum in the pharmacy market particularly, where we're currently promoting our upcoming Pharmacy Supply Chain Leadership Summit in Philadelphia with five customer speakers and a good mix of customers and prospects registered. We are actively engaged with our customers in finding ways to highlight the impact of Texas within their organizations. Since our last call, recent collaborations have included a webinar with Mayo Clinic and promotion of a PROMAT session with Texas Children's Hospital, reinforcing our standing as a trusted partner in the healthcare supply chain and cementing our position as the supply chain software provider for the healthcare market. We continue to see some notable activities in the general distribution market. Last month, we announced New customers, Shadler, Yesco, and Kirby Risk have joined a growing list of electrical distributors selecting Texas. They joined Werner Electric and others in adopting a WMS that is purpose-built with specialized functionality like wire cutting. I'd like to highlight as well how our growing partner ecosystem continues to drive impact with Avalon playing a role in both of these new accounts. More broadly, partners are influencing the and rollouts, with approximately a quarter of our deals involving partner collaboration. On the technology front, our partner engagements are also developing. In January, we announced the Order Dynamics Connector for Shopify to help Shopify merchants streamline the order management and fulfillment processes, enhancing inventory visibility, improving order routing, and increasing fulfillment efficiency. Across the board, our work with partners like KPI Digital, Avalon, CSE, Shopify, and others are helping to accelerate our market access and grow our reach in the market. Regarding market conditions, we're keeping a close eye on the international trade tensions landscape on both sides of the border. Right now, we don't anticipate any material impact on our business. We continue to gain traction across geographies and we'll continue to monitor the situation. Additionally, we've continued to buy back shares under our normal course issuer bid, spending $1.7 million on share buybacks in Q3. And so, as we continue to invest in the products we sell and in our go-to-market strategy, Texas is proving to be among the best cloud-based solutions available in the markets we serve. The steady growth we have experienced affirms our vision and strategy for shareholder value. Mark will now provide further details on our third quarter and year-to-date financial results, as well as some financial guidance on key metrics.

Thank you, Peter. I'll start with slide four and focus first on SAS. SAS revenue growth was 22%, reaching $17.3 million. Recall last year in Q3, we had a one-time revenue recognition of approximately $700,000, to the commission of a product performance obligation. Normalizing for that, growth in Q3 would have been about 28%. As Peter mentioned, Q3 was a record total revenue quarter at $45.2 million. That's up 3% from the same quarter last year. But if you exclude hardware, that growth was 9%. Professional services revenue for the third quarter was $13.9 million. That was up 7% from last year. We anticipate that professional services revenue will remain variable, influenced by the timing of project deliveries and the level of involvement from integration partners. That said, Qtree was also a record quarter for professional services bookings, which came in at $24.4 million. That was up 170% from the same quarter last year. our professional services pipeline is now at a record level. For the third quarter of fiscal 25, gross margin was 47% compared to 45% in the same period last year. The key drivers here are increasing SaaS margins as well as strength in professional services margins in the quarter. Net profit in the quarter was $1.2 million compared to $759,000 in the same quarter last year. Basic and fully diluted earnings per share were $0.08 in the current quarter compared to $0.05 in the prior year quarter. Adjusted EBITDA was $3.5 million in Q3 fiscal 2025 compared to $2.6 million the same quarter last year. Turning briefly to our year-to-date highlights, and that's slide five in the companion deck, SAS revenue for the first nine months of fiscal 25 was $48.7 million. That's up 29% from the same period last year. Our total revenue reached $129 million, a 2% increase from last year. Excluding hardware, revenue grew by 10%. For the first nine months of fiscal 25, our adjusted EBITDA increased to $9.1 million last That's up from $6.8 million in the same period last year. And that's a 33% year-on-year increase. Fully diluted earnings per share for the first nine months of this year were $0.18 compared to $0.11 in the same period last year. We ended Q3 with a solid balance sheet. We had cash and short-term investments and no debt. As Peter mentioned, we used about $1.7 million of cash in the quarter to buy back shares under our NCIP. And additionally, the board yesterday approved a quarterly dividend of $0.085 a share. Turning to financial guidance on slide six, we're maintaining our fiscal 25 guidance for SAS revenue growth of 30% to 32% and adjusted EBITDA margins of 8% to 9%. For fiscal 26, we're maintaining guidance for adjusted EBITDA of 10% to 11%. We saw strong Q3 2025 professional services bookings and year-to-date growth in SAS bookings. However, the timing of these bookings is expected to result in full-year fiscal 25 EBITDA margins and SAS revenue being at the lower end of our guidance range. Based on actual third quarter hardware shipments and visibility into overall fourth quarter revenue, we're raising fiscal 2025 total revenue growth guidance from flat to 1% to 3% growth. And we expect to provide fiscal 2026 guidance with our Q4 and full year fiscal 2025 earnings release. I'll now turn the call back to Peter to provide some outlook comments.