National Bank and Stifel Despite its shares falling 5.9 per cent on Thursday following the release of its third-quarter financial results, National Bank Financial analyst John Shao maintained his bullish view on Tecsys Inc. , pointing to its “strong pipeline, steady execution, the partnership opportunities and continued tailwind in the supply chain industry.”
After the bell on Wednesday, the Montreal-based supply chain management software as a service company reported revenue of $35.4-million, narrowly missing Mr. Shao’s $35.8-million estimate but in line the $35.2-million consensus on the Street. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $2.7-million was below projections ($3.0-million and $2.9-million, respectively).
“Tecsys reported what we consider an essentially in-line quarter,” the analyst. “In our view, those in-line results coupled with the unfavourable sentiment towards tech names these days largely explained why the stock was down [Thursday]. However, if we look beyond face value and consider the headwinds from Omicron and a weak U.S. dollar, we believe these results were decent, especially for a shorter quarter care of the peak of Omicron and the holidays in December. On a constant currency basis, total revenue should be approximately $1.7-million higher to $37.1-million while adj. EBITDA should be $1.6-million higher to $4.3-million, both of which were above our previous FX-neutral estimates. When it comes to the growth driver, both SaaS revenue and SaaS bookings remained solid, and if we consider the post-quarter win of a new IDN client, we believe SaaS bookings are tracking well to our estimated $5-million in H2.”
Mr. Shao now expects a re-acceleration in the pace of growth, seeing SaaS as the main driver but also “partnerships to play an increasingly important role in the ecosystem.”
Maintaining an “outperform” rating, he cut his target for Tecsys shares to $55 from $65, acknowledging “the recent pullback in the tech sector has unfavourably impacted the valuation on this name despite the opportunities ahead.” The average on the Street is $56.60.
“Time has allowed Tecsys to scale and expand its platform into a growing logistics powerhouse within the healthcare vertical,” the analyst said. “That fortification along with growth initiatives that include strategic and operational investments and acquisitions are putting Tecsys in a position to scale into broader markets. We believe Tecsys is on the cusp of scaling into a bigger company. We maintain our Outperform rating given the strong pipeline and the Company’s leadership in the supply chain execution market.”
Elsewhere, Stifel’s Suthan Sukumar reduced his target to $52 from $62 with a “buy” recommendation.
“TCS reported in-line FQ3 results, showcasing steady execution despite FX headwinds and Omicron-related deal slippage in the quarter,” he said. “Importantly, SaaS revenue and bookings growth remained healthy, with growth of 50 per cent year-over-year and 130 per cent year-over-year, respectively, providing comfort that the SaaS transition is progressing well. Further, underlying growth on a constant currency basis revealed better than expected organic growth strength, which when combined with new client wins and bookings activity post the quarter, suggests they’re gaining momentum as the company heads into the remainder of 2022. We have made modest changes to our forecast to reflect larger declines in traditional license and support revenues, offset by higher growth in SaaS and pro services, alongside a more conservative ramp in growth investments. On net, our estimates remain largely unchanged.”