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Investing in TECSYS

About TECSYS

TECSYS Today

Founded in 1983. Headquartered in Montreal, Canada.
Market-leading provider of supply chain execution solutions to healthcare, high-volume distribution and 3PLs
Over 500 customers, several thousand sites in North America, Europe, Latin America
Publicly traded on the TSX since 1998 (TSX: TCS )

Our Mission

"To deliver the highest value to our clients, with unparalleled industry solutions that are based on our advanced, proven technologies and feature-rich enterprise suite of applications."

Our Business

TECSYS is a leading provider of warehouse management software, distribution management software, and transportation management software. The Company's customers include mid-size and Fortune 1000 corporations in healthcare and high-volume industries such as packaged gas, import-to-retail, industrial distribution, third-party logistics, and heavy equipment. TECSYS has built its business and its reputation through a single-minded focus on warehousing and distribution operations and by developing robust products and leading expertise over 25 years in business.

The Company employs a seasoned team of supply chain management experts who differentiate TECSYS and who have extensive experience deploying TECSYS' technology in high-volume warehousing and distribution environments. TECSYS has over 500 customers, all with a strong warehousing and distribution focus, and thousands of installed sites in North America, Europe and Latin America.

Our Market

According to industry analysts, the supply chain management industry is expected to grow from $7.9B in 2010 to $9.2B in 2012. Growth will be fuelled by supply chain organizations focusing investments in areas of high business value, notably applications that help reduce costs, drive business growth, improve customer service and improve efficiency. Resumption and growth of SCM project spending is expected to be driven over the longer term by the replacement cycle of legacy systems as well as new areas of supply chain deployment such as those undertaken in healthcare and higher education.

Within SCM is Supply Chain Execution (SCE), on which TECSYS is focused — execution-oriented applications that enable the efficient procurement and supply of goods, services and information to meet customer-specific demands. SCE includes Warehouse Management Systems (WMS), Transportation Management Systems (TMS), and supply chain inventory visibility which provide a single solution to manage the inbound and outbound logistics process of a distribution operation. Capital spending on information technology has improved from the recent global economic downturn, and the WMS market has taken part in this rebound. The worldwide market for Warehouse Management Systems experienced an 8 percent growth rate in 2010.

The Company is cautiously-optimistic of its growth potential based on the continued positive market reaction to its value proposition and the expected annual growth rate of the overall supply chain management software and services market.

TECSYS Target Market (PDF, 390K)

Value

How We Build Shareholder Value

Focus on vertical markets: Prospective clients who have both the need and the financial resources.
Leverage our technology and industry experience/expertise: TECSYS' key differentiators present a high barrier to entry.
Build a recurring revenue stream: Currently represents 39% of revenue (end of FY2011) and growing.
Strengthen our market position: Recognized by Gartner as a Top 5 WMS supplier, and a dominant supplier for hospital supply networks.
Manage growth: High ROI and profitability.
Consistently generate cash.
Continue to invest in our own shares through NCIB.
Dividend payouts: Currently 3 cents paid semi-annually (3%); increased by 20% in Q3 2011.

Improved Returns to Shareholders

"Our strategy for improved EPS continues to be: revenue growth, focus on selling our high margin products and continuing to buy back our stock. We are positive about the opportunities ahead, particularly due to our strong market position, new product introduction and our solid pipeline. We remain focused on further penetrating our existing vertical markets and improving our market share. We continue to build our recurring revenue for the future and expand our offerings to our existing clients. With these pillars in place, we feel confident about the future.

In 2011, we were able to return over $1.8 million to you, our shareholders; $1.2 million delivered through share repurchase and $657,000 through dividends. Using our Normal Course Issuer Bid (NCIB), we purchased 620,353 of our outstanding common shares for cancellation for a total investment of $1.2 million. In addition, as per our dividend policy, and due to our continued positive performance as well as cash generation, the Board of Directors declared a semi-annual dividend of $0.025 per share which was paid on October 6, 2010. On March 3, 2011, the Board of Directors increased the semi-annual dividend by 20% to $0.03 per share that was paid on March 31, 2011."

Peter Brereton, President and CEO, TECSYS Inc.

Performance

"In Q3, we were pleased to see a significant number of new contracts from our client base and major wins in the health systems and heavy equipment dealer markets. We continue to be the market leader in health system supply chains in North America. Our year-to-date revenue and profitability are ahead of last year by 14% and 21% respectively. Our license fee sales are up 26% for the quarter and 70% year-to-date. Over the past year we have grown our human capital infrastructure substantially to respond to our growing demand for services. We have added 85 people and ramped up our expenses by $1.1M compared to Q3 of last year. Most of this was done over the summer and fall. It takes some time for this additional expense to generate revenue. Our strong balance sheet has allowed us to make this aggressive move. The opportunities ahead with our sales pipeline and prospecting business initiatives are both solid and continuing to rise. According to the leading industry analysts firm, the supply chain management industry outlook is positive and is expected to remain prosperous in 2013."

Peter Brereton, President and CEO, TECSYS Inc.

FY2011 Financial Snapshot

Note: Effective May 1st, 2008, TECSYS' financial reporting is expressed in Canadian currency instead of US Currency.

Conclusions

We have earned a market-leading position in the following industries:

Hospital supply networks (IDNs)
Service parts distribution (Caterpillar dealers)
Packaged gas and industrial supplies

Our customer base:

Has the need
Is well capitalized, good for the long haul
Is a major source for repeat and sustainable business
Provides recurring revenue of approximately 39% of annual revenue (at the end of FY2011)

Performance (as of the end of FY2011):