Investors

A Word from the CEO

Dear Shareholder,

Overall, Q3 was a reasonable quarter, considering the current state of the economy. We made good headway in our business development initiatives with prospective clients across our business units, and, although we are in a leading position in a number of these opportunities, Q3's revenue was impacted by the slower than usual decision making and by the significantly lower US Dollar which impacted our revenue by $750K. In spite of this, I am pleased to report that we continued to win new business and our client base continued to invest in our solutions and services throughout the quarter, culminating in a number of new agreements. We also posted positive results, continued to generate cash and after the end of the quarter our board of directors declared a semi-annual dividend of $0.025 per share.

Below are the key financial highlights of the quarter:

• Revenue was $8.8M in Q3, 2010 compared to $9.6M in Q3, 2009; the reduction was primarily due to the weakening of the U.S. Dollar. However, year-to-date sales of our high margin proprietary products increased by 11% compared to the same period of last year.
• Gross margin increased to 44% in Q3, 2010 from 42% in Q3, 2009.
• Earnings from operations for Q3, 2010 were $142K compared to $329K in Q3, 2009.
• EBITDA for Q3, 2010 was $458K compared to $480K for Q3 of last fiscal year.
• Net earnings for the third quarter, 2010 were $62K or $0.00 per share compared to $97K or $0.01 per share for the third quarter of last fiscal year.
• At the end of Q3, 2010, backlog stood at $17.8M and recurring revenue at $13.2M.
• Cash, cash equivalents and other short-term investments amounted to $7.5M at the end of Q3, 2010, the same as at the end of Q3, 2009 with no significant long-term debt.
• In accordance with the Company's dividend policy, the Company's Board of Directors has declared a semi-annual dividend of $0.025/share, to be paid on March 31, 2010 to shareholders of record as of the close of business on March 12, 2010.

Furthermore, during the quarter, our services organization deployed our supply chain execution software at fifteen customer sites, three of which were in healthcare, five in high-volume distribution for mid-to-large clients and seven in the SMB sector.

From a business development perspective, two key initiatives were launched during the quarter which we believe will further strengthen and grow our business. First, during the quarter, we announced Visual Logistics, our latest software innovation for supply chain management. After years of technological standstill in the industry, our new technology represents a breakthrough that we believe can revolutionize the logistical process and provide us with a strategic advantage in competitive situations. Second, also in Q3, we started the process to target a new vertical; the Higher Education market of Colleges and Universities. The Higher Education market is significant with virtually no technology in their supply chain, very similar in dynamics and business case to the hospital supply network market we are leading today. I look forward to seeing the results of these two initiatives.

As of April 19, 2010, TECSYS Montreal will be moving to 1 Place Alexis Nihon, Montreal, Quebec. Following ten years at our existing facilities and with our lease coming to its end, we took the opportunity to assess our current and future needs, cost structure and what the market had to offer. We decided that a move offers TECSYS and its stakeholders significant benefits; a more modern and efficient facility, better proximity to services and substantial savings of $600,000 annually. For further details, please see our web site.

In summary, our third quarter was a challenge, and yet we ended the quarter with a strong balance sheet, a decent backlog, good recurring revenue and a pipeline that is more active than we have seen in several years. While buyers are still cautious, we are beginning to see more normal buying patterns emerging. We believe this bodes well for the future.

Thank you for your ongoing support.

Sincerely,

Peter Brereton
President and CEO

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