TECSYS Inc.

Good morning, everyone.

Welcome to Texas Fiscal Year 2026 Fourth Quarter and Full Year Results Conference Call. Please note that the MDMA and financial statements were filed on Cedar Plus after market close yesterday. All dollar amounts are expressed in Canadian currencies and are prepared in accordance with international financial results. Some of the statements in this conference concluded in a question-and-answer period, mainly from forward-looking statements that are based on the 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 Tuesday, June 30, 2026, at 8.30 a.m. Eastern Time. I would like to turn the conference over to Mr. Peter Burton, Chief Executive Officer at Texas. Please go ahead, sir.

Thank you. Good morning, everyone. I'm joined today by Mark Bentley, our Chief Financial Officer. We appreciate you joining us. I'm pleased to report that fiscal 26 closed with records across the board. Record Q4 revenue of $50 million, record Q4 adjusted EBITDA of $6.7 million, and record full-year revenue of $193 million. SAS grew 20% for the year, and adjusted EBITDA reached 10% ahead of our guidance range. These results reflect the continued strength of our elite platform and our healthcare solutions, which remain the core of our business and the primary driver of SAS ARR growth. Before Mark covers the financials, I want to share some of the highlights from the year. In 2004, we added two significant new customers, Memorial Hermann Health System, an $8.3 billion patient revenue health system, and one of the largest not-for-profit systems in Texas, selected Texas to power supply chain operations across their network. And Shepherd Center, one of the country's leading specialty hospitals for spinal cord and brain injury rehab, represents our first win in the rehab space. These wins cap a year that also brought in Memorial Sloan-Kettering, UT Southwestern, and major names in life sciences and global distribution. New local bookings were up 33% year over year, reflecting both the breadth of demand and the quality of our pipeline. The regulatory tailwinds we described in Q3, EFCSA enforcement, 340B scrutiny, are driving increasing urgency around modernization, and we expect this to translate into accelerating investment as yield cycles mature. And as AI evaluation matures, we believe buyers are gravitating towards the main specific partners over general purpose platforms, precisely where Texas is positioned. Our intelligence engine, Texas IQ, became commercially available in our Q3, and in Q4 we released Texas IQ Image Capture, automating a time-sensitive, labor-intensive step in supply chain receiving workflows. We are on track to continue to release additional agents in fiscal 27, with initial focus areas in point-of-use operations, pharmacy workflows, and administrative processes. Texas IQ is built to draw on healthcare-specific sources, such as the eSHIP database, GoodID, FDA, and then combine that with our own real-time digital supply chain data, a data foundation that a horizontal vendor simply cannot replicate quickly. It is one of the reasons the intelligence we deliver is operational and meaningful, rather than just directionally interesting. Across fiscal 26, our team completed more than 30 customer go-lives, Thank you for joining us. A new e-signature work phone was designed, built, and delivered in under three months and has since been incorporated into our latest Elite 2026.1 release as a standard capability. Also in Q4, Parkland Health in Dallas, one of the largest public health systems in the United States, went live on our point of use. And UNC Health went live on the Texas Pharmacy Inventory Management System, adding to the Texas point of use solution that was already running across the system. We hosted the 2026 Texas User Conference in Nashville from May 31st to June 3rd, our strongest yet, with registrations up 44% year-over-year. Customer speakers included Advent Health, Vanderbilt Health, St. Luke's, Wellstar Health, and Curvy Risk, among others, and our partnership sponsorship succeeded targets. We continue to be recognized by the most influential analysts throughout fiscal 26. We were positioned again as a challenger in the 2026 Gartner Magic Quadrant for Warehouse Management Systems, our 15th consecutive inclusion. Forty percent of the 2025 Gartner Healthcare Supply Chain Top 25 included two masters, our Texas customers, and we were recognized as a leader in the 2025 Nucleus Research WMS Technology Value Matrix for the second consecutive year. Since quarter closed, Texas has been designated FedRAMP Agency Authent Process. Thank you for joining us. I'll now turn it over to Mark to provide some additional financial details for the year and quarter, as well as financial guidance on several key metrics.

Thank you, Peter. As a reminder, our fourth quarter ended April 30th, 2026. And I'll focus on Q4 results and then follow that with brief highlights on full fiscal 2026 results. Total SAS revenue grew 17% in Q4. reaching $21.5 million. That was up from $18.4 million in Q4 last year. That growth was about 18% on a constant currency basis. Elite SAS revenue, our core product and the predominant contributor to total SAS revenue, increased by 21% compared to the same period last year. Total SAS ARR was $86.8 million at April 30th. 2026, that was up 13% from $76.5 million at the same point last year. On a constant currency basis, SaaS ARR growth was 15%. Our elite SaaS ARR grew by 19% over the same period, representing 21% constant currency growth. SAS RPO was $243 million on April 30th. That was up 12% from a year ago, or 14% on a constant currency basis. As Peter mentioned, Q4 fiscal 2026 total revenue was $50 million, a new record for Texas, compared to $46.6 million in Q4 last year. Our Q4 total gross margin was 52% this year, compared to 51% in Q4 last year. and Fast Margin Expansion was the key driver here. Net loss in Q4 fiscal 2026 was $0.2 million or 2 cents per diluted share compared to net profit of 1.7 million or 11 cents per diluted share in Q4 last year. The Q4 fiscal 2026 net loss reflects $3.4 million in after-tax restructuring costs. Adjusted net profit, which excludes the impact of after-tax restructuring costs, was $3.2 million in Q4 of this year, up significantly compared to $1.7 million in the same quarter last year. Adjusted EBITDA was $6.7 million in Q4 of fiscal 26. That was up 56% from $4.3 million in the same period last year. Turning briefly to our full-year highlights, Thank you for joining us. Adjusted net profit was $7.5 million for the year, up 67% compared to the prior year. Finally, adjusted EBITDA for the full year was $20 million. That's up 50% year-on-year and represents, as Peter indicated, a 10% EBITDA margin, demonstrating continued operational scaling of our business. We ended the year with cash and short-term investments of $31.2 million and no debt. During fiscal 26, we purchased approximately 424,000 shares for approximately $13.2 million under our normal course issuer bid. That compares to about 172,000 shares for $6.9 million last year. Finally, the Board yesterday approved a quarterly dividend of $0.09 per share. Moving on now to your fiscal 2027 guidance. Our total revenue growth guidance reflects sustained SAS revenue growth and our expectation for stable professional services and hardware revenue, with ongoing declines in legacy maintenance revenue, including the effects of SAS migrations. We also expect continued adjusted EBITDA margin expansion as the operating leverage of our business model continues to play out. Finally, to provide investors with greater visibility into the performance of our core growth engine, we are introducing guidance for elite SaaS revenue growth. Our guidance for fiscal 2027 is as follows. Total revenue growth of between 2% and 4%. Elite Fast Revenue Growth between 18 and 20%, Total Fast Revenue Growth between 13 and 15%, Adjusted EBITDA Margin between 11 and 13%. I'll now turn the call back to Peter.

Thank you, Mark. We are very pleased with our Q4 and full-year results, and I want to thank our investors and board, our partners and customers, and the entire team at Texas. In summary, our key themes from Q4 and fiscal 26. Record revenue, record adjusted EBITDA, ahead on adjusted EBITDA margin. New local momentum and a 31% stronger pipeline. Texas IQ, live and expanding, with purpose-built agents hitting the market this year. healthcare leadership reinforced through a record-breaking user conference and ongoing analyst validation, and FedRAMP in-process designation, expanding our compliance posture for federal healthcare. We enter fiscal 27 with a strong recurring revenue base, a differentiated position in healthcare and complex distribution, and a platform advancing in the direction that the market demands. We are very confident in the opportunities ahead. With that, we will open the call for questions. Thank you.

Ladies and gentlemen, we will now begin the question and answer session. If you'd like to ask a question, please press star, then the number one, and your telephone keypad. If you'd like to answer a question, please press star, then the number two. Our first question comes from Doug Taylor from National Bank.

Please go ahead. Yeah, thank you. Good morning, gentlemen. I'll start with a question on the maintenance and support revenue. Some quick math suggests that if the services and hardware are flat and with your SaaS growth, maintenance and support would be declining almost 20% this year. First of all, I guess I'll ask if there's something I'm missing there. as a follow-on to that, perhaps it's worth revisiting the SAS conversion of the legacy maintenance stream, the migrations you're talking about, and the magnitude of that and how that's expected to run off and convert this year and into the future.

Do you want to take that one, Mark?

Yeah, sorry. Thanks for the question. I just took myself off mute there. So a couple of things to unpack in there. First of all, the trajectory of maintenance and support revenue. We're definitely expecting a decline there. It's not the same level that you're triangulating into. It's going to be roughly kind of half that size in gross terms. I think you said 20%. So that number is declining, and what's causing that declining is is primarily the tail of the migrations that are winding off in Kindred and SAS. So that's point one. Number two, in terms of SAS migrations and how that's played out, we did see, you know, we saw big numbers for SAS migration bookings in 24 and 25 and 26. We saw A very significant decline in SAS migration bookings as we get to the, I would say, the longer tail end of conversions. We expect that SAS migrations will continue at the sort of 2026 level, a less, a much less meaningful level going forward, and also expect that there's, you know, from our point of view, there's quite a number of years of tail on that what's left to convert.

Okay, so fair to assume that the SaaS growth that you anticipate, you know, much of that is going to be, you know, net new customers and expansions and the conversion of your expanding pipeline you referenced versus, you know, the migration impact.

Exactly.

Okay. Given, you know, the mix shift that, you know, is suggested as a part of that. Would you expect, you know, the gross margin expansion here to be consistent with, you know, the EBITDA expansion, you know, versus the savings you're seeing in OPEX?

Well, yeah, I mean, what we're providing for, you know, the guidance that we're providing is around total, I guess, EBITDA margin expansion, and we're sort of at 11% to 13% in that guidance range. We do expect that, you know, We do expect that SAS margins are going to continue to expand. We've got a multi-year trajectory there, line of sight 75% plus over a number of years, but we certainly expect that SAS margins are going to continue to expand in the current year.

And for the maintenance and support, given the Thank you very much.

you know slightly bigger part of the total bucket over over time but we're talking about a multi-year uh period of time you know as inaugurations kind of roll on things so we don't see near term we don't see near term pressure on that maintenance and support margin okay i appreciate that clarification uh last one for me and i'll pass the line you know structuring savings uh i think you quoted them at 8.1 million is that fully baked into the guidance or

is there any of that left to kind of scale over the course of the year and will have follow-on benefit in the years ahead?

Yeah, that's baked into the guidance. I mean, it has, you know, we have, we structured that level of cost out of the business and then as we mentioned, you know, at the end of Q3 in our commentary and since then, you know, You know, our outlook includes, you know, reinvesting in the business. And so, you know, not all the reinvestment has happened yet, but that's definitely fully baked into our diversity-based guidance.

Okay. I appreciate the answers. I'll pass the line. Thanks, Greg.

Okay. The next question comes from the line from Stifel.

Good morning, gents. First question, I want to touch on the U.S. healthcare backdrop. You know, it sounds like you guys are seeing sustained traction there. Can you provide an update on the demand signals you're seeing there and how sales cycles are progressing today?

I mean, the demand seems very strong. You know, we're Thank you for joining us. Thank you for joining us. It looks as though if they roll out our platform throughout just their general supply space, they'll save $80-plus million after the full cost of our platform and the project and everything else over the next few years. There's a lot of money to be saved by properly managing these supply chains, whether in general supplies or in pharmacies. We We seem to feel like the strong momentum is going to continue. The user conference was really exciting. The place was packed and we actually had to shut down registrations two weeks before the conference because we were just sold out. It was going to be standing room only. A lot of those were hospital networks coming to talk, coming to figure out how to further expand on the platform. A number of prospects came to the conference to be able to see the platform but also be able to talk to other customers and hear how their experience had gone. So the momentum seems really strong in spite of a lot of distractions that you would think could slow it down, but they don't seem to be doing that.

Okay, great. For the second question, I want to touch on AR growth and the full-year SaaS guy. So you guys delivered on 13% AR growth and before your SASCAD, you saw like a 13% to 15%, so a little bit stronger on the top. What are your assumptions underlying the strength here on the upper end of the guide? Is that more a function of potential for lower churn, or is there potential for stronger bookings activity or something that's more top-line accruing?

Yeah, I mean, we have a... Oh, sorry, go ahead, Mark.

No, please, Peter.

I just want to say we have a legacy product, right, that's buried in our overall SaaS numbers, which is sort of slowly fading away. And it's, you know, last year it was about 8 million in SaaS, and this year it'll probably be, I don't know, 4.5 million in SaaS or something like that. It's going to sort of disappear over the next couple of years. So that ends up pulling down the top line overall SaaS growth number. and that's why we're separately disclosing the elite SaaS growth cover because that's really the go-forward platform and that's where we're saying it's really remaining close to 20% growth. So you look at what's driving that, the churn on that platform almost couldn't go lower. I mean, the churn on elite right now averages less than 1.5% a year. So So it's very, very low. So really the growth number has been driven by new accounts and expansions. We see very strong new account activity for that platform. We see a lot of expansion opportunity for the platform. And a little bit still of migration revenue coming from old on-prem accounts migrating over. Most of that's done. So if I look at this year, I'd be surprised if we book more than $2 million of additional SaaS coming out of it. Hold on, credit accounts, the vast majority is going to be new accounts and expansions.

Okay. And in terms of the SaaS growth trajectory, how do you expect that to play out over Q1 and Q4? Do you want to take that one, Mark?

Yeah. I mean, you know, I think we're – I mean, obviously that will ramp up – Yeah, to ramp up as the year goes because, you know, the effect of bookings is cumulative on, you know, on revenue. But that said, you know, like we've got, as Peter said, we've got a very significant, you know, a significant pipeline that's really quite active. We always, when we're planning our year, we're always planning on, you know, the summer months to be, you know, and a slightly slower month, which covers, you know, which hits our Q1 and Q2. So we always have a little bit more, you know, expectation. And if you look at the timing of our pipeline, it tends to be, you know, deal closure tends to be higher in the back half of our year. So that's kind of how we plan out the year and model it.

Gotcha. And so from a trajectory perspective, Thank you very much. Thank you. Is M&A a priority for capital allocation over the near to mid-term?

We don't really see a lot of M&A in the near term. I mean, we continue to see, and some of that is just the map of the marketplace right now. I mean, most M&A opportunities are private companies. Private company valuations right now remain significantly elevated compared to public company valuations. So, It creates a bit of a complicated acquisition market for us. We know some companies are doing it anyway. We continue to feel like our own shares are probably the best deal for capital allocation. I think as we go forward, it'll be a question of if the stock stays low, we probably continue with an NCIB approach. If the stock rebounds to higher levels, perhaps we turn up the dividends, but But the problem is, you know, in the private market, we've looked at companies that, you know, if we paid $30 million to buy them, the day we own them, they're going to be worth $15 million. So the math is not overly helpful for creating shareholder value. So, I mean, if we see something that's a good snap, then we continue to look for those, you know, a small add-in that would strengthen our moat in the healthcare space. And there's some interesting, you know, possibilities there around... Thank you very much.

from a healthcare M&A perspective, you know, do you see opportunity to be acquired as, you know, part of your journey by a larger industry or strategic partner or is really the opportunity here to remain independent and really focus on what looks like to be a pretty significant organic growth opportunity?

Yeah, I mean, our focus continues to be driving this company as, you know, as its own force going forward. I mean, we We see a huge total addressable market. We're the leader in the healthcare space. Our win rate is typically north of 80%, sometimes north of 90% in that market. There's really no direct competitor. So for us, it's just all about execution. Go, go, go. Let's get it done.

Okay. You're good? Thanks for taking my questions. I'll pass along. Great. Thanks.

Your next question comes from the line of Kareem Meher from ADB Colmar Capital Markets. Please go ahead.

Good morning, gentlemen. This is Kareem on behalf of Gavin. Just have two questions. Concerning on order dynamics, we discussed in the past term impacting that business through fiscal 26. Can you discuss the timing of renewals and what types of headwinds ARR you're expecting in fiscal 27?

With respect to order dynamics, Yeah, I mean, that story, I mean, the big part of that ARR impact, you know, remember SAS ARR is the leading indicator, right? So the way we measure that is we look at the ARR at a point in time, and we look at how much contracted revenue we have for the next 12 months at that point in time. So it's a real leading indicator, and we assume it's going to renew unless we know it's the customer's leaving. So it's a pretty good indicator of the forward growth rate for that revenue. And you saw the impact of the most significant part of the order dynamics attrition come through our staff ARR numbers in fiscal 26. That's why they didn't grow as fast as they would have otherwise grown. In fiscal 27, you're going to see going forward, and you see it in our and many, many more. So, you know, we're going to have to wait and see. We don't expect that it's going to be causing any kind of a real significant drag on revenue growth after fiscal 27. So I really expect that 27's total SAS revenue growth dip, which is exactly why we're highlighting this elite SAS revenue growth underneath, like that elite SAS revenue growth number is going to start to The total SASH revenue growth number is going to start gravitating towards that elite SASH revenue growth number, and you're going to see that play out pretty dramatically in Fiscal 28.

Perfect. Thank you so much. My second question is on professional services. We've seen the backlog normalize where you existed in Fiscal 24, but in your guidance, you called for LSD flat, yes. There is a thing you need to see the bookings picking up back to keep that business flat. And can you discuss what you're seeing in the pipeline for professional services?

Yeah, yeah. There was definitely a decline in our opening backlog of professional services coming into this fiscal 27, you know, or ending. Fiscal 26 backlog was quite a bit lower than the end of fiscal 25. I did indicate in the MD&A that we've got pretty good visibility on the near-term impact of that on revenue, and Q1, we're pretty positive on the PS sequential number there. But we do expect it to be, as I said, as we said in the prepared remarks, sort of a stable revenue number. The pipeline looks really good and very strong, and that's primarily because a lot of that pipeline comes through connected to SAS AR deals. So you kind of look at that pipeline, and you look at the SAS pipeline, which is up 31%, and think through that, well, all these deals come through with the patched PS Revenue and PS Bookings and you can sort of triangulate what that should do to continue backlog growth in the coming quarters so we need to book we definitely need to book PS Revenue to continue to build that backlog but like we said the pipeline does look pretty strong right now.

Great, that's it for me. Thank you. Off the line.

Thanks, Graham. Again, if you would like to ask a question, please press star one and you can keep that. I can see there are no further questions. I'll turn the call back over to the presenters. Please continue.

Okay, well, thank you everyone for joining us for these results and the discussion of the results. As always, if you have any questions, don't hesitate to reach out to Mark or I, and we will look forward to speaking to you in September with our Q1 results. Thanks. Have a great day. Bye for now. Thanks.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.