A Word from the CEO

Dear Shareholder,

In Q2 of fiscal 2012, we won the business of seven new customers which has enabled us to improve our annualized recurring revenue to a record $14.4 million and backlog to over $21.5 million, also the highest we have seen to date. We signed a significant number of contracts with existing clients from across our business units, and our services organization continued to execute well against our backlog, improving its revenue by 5% compared to Q2 of last year. Furthermore, our healthcare market continued to be active in our sales pipeline and in recent weeks, we saw renewed interest in two of our addressable markets; service parts distribution for heavy equipment dealers and the packaged gas and welding vertical.

Below are the key financial highlights of the quarter:

• Revenue was $9.1M in Q2, 2012 compared to $9.4M in Q2, 2011. The decline in revenue was primarily due to approximately $330K of deferred proprietary product license revenue that will be recognized in the future as well as a $134K impact due to the weakened U.S. dollar. Excluding the effect of deferred revenue and the exchange rate, revenue would have been slightly higher than Q2 of last fiscal year.
• Profit from operations for the second quarter, 2012 was $170K compared to $740K in Q2, 2011.
• Net profit for the second quarter, 2012 was $133K or $0.01 per share compared to $657K or $0.05 per share for the second quarter of last fiscal year.
• EBITDA for Q2, 2012 was $517K compared to $1,014K for Q2 of last fiscal year.  At the end of Q2, 2012 annualized recurring revenue in Canadian currency increased to $14.4M compared to $14.1M at the end of Q2 of last fiscal year.
• Cash, cash equivalents and other short-term investments amounted to $4.7M at the end of Q2, 2012, compared to $7.3M at the start of the fiscal year.

As mentioned earlier, we won the business of seven new clients, two of which were major accounts: a Fortune 100 healthcare products and services supplier and a U.S. Government department. We also signed nineteen new business agreements with existing clients; four in healthcare, fourteen in general high-volume distribution and one third-party logistics provider. Furthermore, our services organization assisted with the deployment of our supply chain execution solutions at thirteen customers from across our business units in Canada and the United States. Due to the size of our outstanding backlog, we are continuing to increase the size of our services team. While this impacts cost in the short term, the increase in revenue typically follows within one or two quarters.

With respect to the resurgence of two of our addressable markets, we have seen encouraging movements in our pipeline in the service parts distribution for heavy equipment dealers, an industry where we currently have a substantial market share in North America. Prospective opportunities in this market are the best we have seen in a couple of years and have been originating not only from Canada and the United States, but also from South America. In addition, we have seen renewed interest in the gas and welding supplies distribution market. The pipeline is good in this segment where we were able to add one new account in Q2 of 2012. We look forward to taking advantage of these opportunities as they unfold.

In summary, we won several key accounts during the quarter and we continued to be profitable. At $21.5 million, our backlog is healthy; it is the highest we have seen to date and our services organization continues to leverage it for growth. Our business development initiatives are strong and our sales pipeline healthy. We feel positive about the opportunities ahead.

Until next quarter, we thank you for your continued support.

Sincerely,

Peter Brereton
President and CEO

Read Peter Brereton's executive biography on the Management page.