Tecsys Inc.

Thank you. Good morning, everyone.

I'm joined today by Mark Bentler, our Chief Financial Officer. We appreciate you joining us for today's call.

I'm pleased to share our third quarter fiscal '26 results with SaaS revenue up 17% and adjusted EBITDA up 43% compared to the same quarter last year. This is highlighted -- this is the highest adjusted EBITDA quarter in our company's history.

We also achieved the largest Q3 SaaS bookings quarter in our history, achieved without any migration bookings, which we believe underscores the demand for our core offerings and the strength of our pipeline. We saw strong SaaS bookings across both our health care and distribution verticals with new logo wins leading the way, including Memorial Sloan Kettering, one of the world's most renowned cancer centers; UT Southwestern, one of the top academic medical centers in the U.S.

and one of the world's largest paper packaging companies as well. In Q3, our pipeline growth remained strong with our ending Q3 pipeline up 30% from the same time last year.

These results highlight the strength of our Elite platform and our health care solutions, which represent the core of our business and a primary driver of SaaS ARR. They also strongly reinforce our value as customers navigate the convergence of 3 powerful forces: an evolving regulatory landscape, persistent macroeconomic pressure and an AI ecosystem characterized by rapid innovation and uneven maturity.

The shifting regulatory landscape in the U.S. health care system continues to reshape requirements across the supply chain.

For example, the Drug Supply Chain Security Act requires every product to be electronically traceable at the package level and the 340B Program demands rigorous tracking, auditing and documentation to show that discounted drugs are being used appropriately. As these regulations move into a period of stricter enforcement throughout 2026, compliance is shifting from a best effort initiative to an imperative operating discipline with real consequences for organizations that aren't ready.

At the same time, the broader macroeconomic climate is prompting health care leaders to accelerate technology investment, not slow it down. Despite cost pressures, organizations are allocating more budget to digital infrastructure, automation and data readiness.

Analysts project continued year-over-year growth in technology spending among U.S. health care providers, reflecting the urgency around modernization and resilience.

Finally, the era of unrestrained AI evangelism is giving way to more mindful evaluation, and we're seeing buyers gravitate toward partners with advanced AI capabilities, combined with deep vertical expertise and industry-specific solutions like unit level traceability, federal compliance audit capability and secure chain of custody requirements in health care, the kind of domain-informed approach exemplified by Tecsys. As mentioned in our earnings press release, our AI intelligence layer, TecsysIQ, became commercially available in Q3.

TecsysIQ unifies data from multiple sources, including health care-specific ones like ASHP, which is the American Society of Health-System Pharmacists, GUDID, which is the Global Unique Device Identification Database and the U.S. Food and Drug Administration.

It can bring together critical information like drug shortage data, device identifier data and recalls and safety alerts, transforming it into clear and actionable insights. This capability significantly amplifies the value of our core enterprise systems, empowering customers to unlock the full potential of AI and improve operational performance.

We're encouraged by the early momentum and the expanding role TecsysIQ will play in delivering measurable supply chain value. The same appetite for operational improvement is fueling exceptional interest in our pharmacy solutions while accelerating our brand awareness in the market.

Pipeline for our pharmacy inventory management system grew more than 200% year-over-year, supported by strong brand momentum, new industry research and record engagement at our Pharmacy Summit in Houston, Texas this week, where total registrations increased 77% year-over-year and participation from health system leaders was up 67%. Our research survey findings are driving increased media coverage, while recent recognitions for Modern Healthcare and RXinsider reinforce our position as a leading and trusted partner in the pharmacy space.

Our distribution business also delivered solid progress in the quarter, reflecting ongoing demand, strong execution and significant market traction. As I mentioned at the top of the call, we signed a significant deal with one of the world's largest paper packaging companies, reinforcing our position as a partner of choice for complex high-volume distribution environments.

In November, we went live with Carolina Cat, who are already seeing strong ROI for their operating efficiency. And in December, we successfully went live with Kirby Risk, an electrical supply manufacturing and logistics organization operating in more than 40 locations.

This implementation establishes a solid foundation for their next phase of operational transformation, which will include expanded automation capabilities. Overall, the quarter reinforced the strength of our strategy as organizations across health care and distribution increasingly seek partners who combine domain expertise with advanced purpose-built AI.

With strong pipeline expansion and rising market visibility, we are well positioned as a trusted modernization partner in sectors where reliability, compliance and AI readiness are critical. Mark will now provide further details on our Q3 results as well as financial guidance on several key metrics.

Thank you, Peter. As a reminder to everyone, our third quarter ended January 31, 2026.

I'll start with SaaS. As Peter mentioned, SaaS revenue growth was 17%, reaching $20.1 million in the quarter.

That growth was 18% on a constant currency basis. SaaS ARR was $83.3 million at the end of Q3 fiscal '26, which was up 10% or 16% on a constant currency basis from the same quarter last year.

Our Elite SaaS ARR, which is our core product and the predominant contributor of total SaaS ARR grew by 17% over the same period, which was actually 23% on a constant currency growth basis. Sequentially, SaaS ARR increased by $2.2 million in Q3 fiscal '26 compared to the prior quarter as record Q3 bookings were partially offset by unfavorable impact from foreign exchange of about $2.1 million and attrition among a small group of noncore customers, which was previously discussed in the Q2 MD&A and earnings call.

That known attrition will continue to have a moderating effect on reported SaaS ARR growth over the next 2 quarters. One more point about SaaS bookings.

I want to highlight that bookings from new logos are up over 150% during the last 12 months compared to the year ago period. That acceleration is an important indicator of the underlying demand environment and the strength of our competitive position.

It speaks to the durability of our growth and the expanding relevance of our platform in the markets we serve. SaaS RPO was $248.9 million at the end of Q3 fiscal '26.

That's up 18% from the same time last year. That's actually 24% growth on a constant currency basis, demonstrating again, momentum on SaaS bookings as well as renewals in the period.

Professional Services revenue for the third quarter was up 8% from the same quarter last fiscal year to $15 million. Professional Services backlog was $36 million at the end of Q3 fiscal '26.

That's down 19% or 14% on a constant currency basis from a tough comp at the end of Q3 last year. Based on our Professional Services backlog heading into Q4, we expect Q4 Professional Services revenue to look more like Q3 this year than Q4 last year, which was $16.2 million.

For the third quarter of fiscal '26, gross margin was 51% compared to 47% in the same period last year. The key drivers here are increasing SaaS margins as well as the strength in Professional Services margins in the current quarter.

Net profit in the quarter was $1.7 million compared to $1.2 million in the same quarter last year. Basic and fully diluted earnings per share were $0.12 in Q3 this year compared to $0.08 Q3 last year.

Adjusted EBITDA was $5 million in Q3 fiscal '26 compared to $3.5 million same quarter last year. On a last 12-month basis through Q3 fiscal '26, adjusted EBITDA is up 49%.

Turning briefly to our year-to-date highlights. SaaS revenue for the first 9 months of fiscal '26 was $58.9 million.

That's up 21% from the same period last year. Foreign exchange did not have a significant impact on SaaS revenue compared to the same period last year.

Our total revenue reached $143.1 million. That was a 10% increase from last year, which was 9% on a constant currency basis.

Excluding hardware, overall revenue grew by 13% or 12% constant currency. For the first 9 months of fiscal '26, our adjusted EBITDA increased to $13.3 million, up from $9.1 million in the same period last year.

Fully diluted earnings per share for the first 9 months of fiscal '26 were $0.29. That's up 61% compared to $0.18 in the first 9 months of last year.

We ended Q3 with a solid balance sheet. We had cash and short-term investments of $36.2 million and no debt.

We used about $3.7 million of cash in the quarter to buy back shares under our NCIB, and we also paid out $1.3 million in dividends. Additionally, the Board yesterday approved a quarterly dividend of $0.09 a share.

After the end of the third quarter, we implemented a workforce reduction of approximately 7% across multiple functions as part of a broader initiative to optimize the company's operations. This action will result in an estimated restructuring charge of $4.5 million, which will be recorded in our fourth quarter of fiscal '26 and is expected to generate approximately $8.1 million in annual operating cost savings.

These reductions create flexibility for the company to redirect resources into strategic growth initiatives. And accordingly, the future operating cost profile will reflect both the realized efficiencies and the reinvestments required to support long-term growth.

Turning to financial guidance. Based on our performance through the first 3 quarters of fiscal '26 and our outlook for the remainder of the year, we're reaffirming our full year fiscal '26 guidance for SaaS revenue growth of 20% to 22%, total revenue growth of 8% to 10% and adjusted EBITDA margin of 8% to 9%.

I'll now turn the call back to Peter to provide some outlook comments.

Thank you, Mark. We are very pleased with our third quarter results, and I want to thank our investors and Board, our partners and customers and the whole team at Tecsys.

As we look ahead to Q4 and beyond, we'll be expanding TecsysIQ with the next wave of intelligent agents designed to automate more of the routine, time-sensitive and compliance heavy work that burdens supply chains today. These upcoming capabilities will deepen our presence across point-of-use operations, pharmacy workflows and administrative processes, delivering greater visibility, earlier detection of operational risks and more autonomous decision support.

We are also advancing our AI-enabled productivity tools, which will streamline configuration and simplify the day-to-day tasks that keep enterprise supply chains running. We're also in full planning mode for our annual user conference, TUC 2026, taking place in Nashville in early June.

We're on track for one of our strongest events ever with record customer attendance expected, a standout lineup of customer speakers and partner sponsorship already exceeding targets, clear evidence of deep engagement and advocacy. And so in summary, I want to remind you of our key themes this quarter.

Strong fundamentals. Elite SaaS ARR is up 23% year-on-year on a constant currency basis.

Adjusted EBITDA, up 43%, our highest quarter on record. Quality of demand, record Q3 bookings without migration bookings, underscoring healthy new logo momentum and pipeline depth.

Health care leadership, we have robust SaaS bookings and pipeline growth with traction across our diverse range of health care solutions. And when it comes to AI differentiation, we are delivering domain-informed intelligence that unifies critical data, surfaces actionable insights and enables autonomous execution, amplifying the value of our core enterprise systems.

We believe these themes will be the bedrock of our ongoing success, profitable growth and shareholder value creation. With that, we'll open the call for questions.

Thank you.

First off, congrats on the record bookings. If you could give us a sense of what drove that outperformance?

And more importantly, does the strength give you more confidence that the elongated cycle that you guys described in Q2 are starting to clear or are these wins already deep in the pipeline for some time?

Yes, good question. I mean our -- as you know, we've seen our pipeline sort of growing and growing and growing for over a year, very substantially.

And we always had confidence that the wave was going to break at some point, but it's sometimes hard to predict exactly when it's going to break. There were a lot of distractions through the summer and fall and right up to Christmas.

And [indiscernible] with tariffs and changes to the Affordable Care Act funding and even changes to Medicaid subsidies and so on. But the thing is at this point, it's almost like the future is kind of settled in a way.

A lot of the health care organizations and general distributors are seeing, okay, tariffs are sort of just the new reality. You've got to plan them into your business planning as best you can, and you've got to move ahead.

So we're seeing people starting to ignore the noise and just start to move ahead with decision-making. So I mean, we'll see where it goes from here.

But certainly, it seems to us that a pretty strong pipeline velocity is back, and we're pretty excited about what we're seeing ahead over the next few quarters.

So is it fair to say that the number of deals at vendor of choice stage is lower than last quarter?

No, I would say it's similar to where we were. I mean we've signed some of the deals where we were a vendor of choice, but we've also been made vendor of choice in a number of new deals.

So we're feeling pretty good.

Fantastic. On the restructuring, can you guys unpack where the reductions are concentrated and what you guys are reinvesting into?

Or does some of that flow into the bottom line? And then maybe related to that, given that you guys just reported record bookings and a strengthening pipeline, I just wonder what drove the decision to cut headcount now?

Was it just efficiency? Or are you guys signaling that you're managing more cautious outlook?

I don't believe that's the case, but I'd like to hear your thought.

Mark will take a first crack at that, and then I may follow up with some extra color.

Yes. I've got a few points about restructuring.

First, this restructuring is about strengthening the business, not shrinking it. We're aligning resources to accelerate AI-driven productivity, improve sales execution and increase operating leverage.

That's the objective. As a result, [indiscernible]

[indiscernible] technologies that are making us more efficient. So you sort of take that all into account and run through a clean sheet exercise and say, what do you need moving forward.

And as Mark says, from here, we will continue to reinvest. Some of these new technologies are expensive.

We need room to reinvest there. But we're also very focused on efficiency and driving EBITDA to new levels as we're seeing the business sort of reaching an inflection point and a point of maturity in the migration to SaaS that says it's time for a lot more EBITDA.

Fantastic. That's great color.

Then maybe one last one. On the noncore attrition over the next couple of quarters, can you give us a sense of the cadence or the roll-off cadence?

And this is entirely the population that you guys already knew about? Or is there any incremental pressure that we should be thinking about?

Yes. That's -- I mean that's -- it's pretty much the same story that we talked about last quarter.

There's some known attrition in that noncore group of customers. We've got pretty good visibility on what that looks like.

It's going to, I think, mostly play out over the next 2 quarters in terms of SaaS ARR. It has a bit of a lagging effect, of course, on revenue because SaaS ARR is forward-looking and revenue is sort of -- reported revenue is backward looking.

And in terms of how much headwind is out there on the ARR, I mean, it's going to be in rough terms, around $1 million over the next couple of quarters that we'll see as headwind there, I believe. And that should play out, like I said, pretty clearly over the next couple of quarters.

I think the important thing is we're trying to highlight when we talk about these metrics, this Elite SaaS ARR number. And when people look at what's happening with sequential SaaS growth, is it accelerating or is it decelerating?

You should be looking at that Elite SaaS ARR number. That's the leading indicator of the core business.

As we mentioned in the remarks, as Peter mentioned, that constant currency growth was 23%. That actually accelerated a bit from last quarter where it was 21%.

So that underlying business and that health in that Q3 bookings that we saw and the strength of our pipeline releasing into bookings, which is manifested in that SaaS ARR growth. I mean it is -- we saw acceleration there in Q3 for sure.

I think with the Houston pharmacy event saw now, you talked about the registrations and pipeline trending well. Any kind of anecdotes or kind of the conversations or thoughts around buyer that you're getting out of the sales team?

Not really. I mean there's -- I mean, the health care providers, by and large, as they look out over the next 2, 3 years, I mean, they do see restrained revenue, right?

I mean they're not certain how many of their customers will actually come in insured as a lot of customers are having to give up on the Affordable Care Act marketplace and finding it just too expensive. And as the restrictions kick in around Medicaid, those may get further kicked down the field.

But generally speaking, I think a lot of these hospital networks tell us as they look over the next few years, they see at least moderating revenue, possibly declining revenue. And yet at the same time, they're seeing that there is opportunity to really sort of strengthen their operating efficiencies.

And we're increasingly in a position where by word of mouth, even we're able to highlight the very hard savings that we can drive by operating the whole supply chain more efficiency across general supplies, implants, pharmaceuticals, et cetera. So that seems to be overall what's driving it.

We've also had -- we've invested very substantially in quality and implementation ease over the last few years. And we're seeing that pay off as well.

I mean go-lives used to be far too exciting. They're getting more and more -- I'm trying to think of a better word than boring, but they're getting very straightforward when these networks deploy and go live.

So that is causing more networks to be interested in implementing when they hear it. It's just not very scary.

It's actually a pretty smooth process.

Great to hear. And then maybe just on the new logo strength that you saw this quarter.

Curious where customers are starting in the IDN space. Is that pharmacy?

Is it CSC? Is it point of use?

Any thoughts there?

It's across the board. It's a general mix.

But I would say at this point, you're probably looking at -- even if I combine sort of what's signed and what's in the pipeline and so on, you're kind of looking at -- I would kind of break down 40% pharmacy, 40% point of use and 20% CSC would be the very high-level breakdown there. The CSC business continues, but it's a subset of the IDN marketplace that's interested in the CSC, whereas they can all gain efficiencies by better management of point of use, including the OR, cath lab, IR, et cetera, as well as the, of course, pharmacy.

That's great. And then maybe just lastly on TecsysIQ.

Can you just flesh out a little bit some of the use cases that you're starting to see happen in the base? And maybe just flesh out a little bit how discussions are going with customers and prospects and your sense of their keenness to adopt some of this new technology.

Yes. I mean it allows you -- I mean, the main thing is it has access to both internal and external data, and it can use it in a combined fashion to sort of highlight the right actions, right?

So you're -- I mean, we're seeing it -- pharmacy is probably where we're seeing the uptake the quickest. We're involved with a couple of pilot environments where we're using TecsysIQ to look at what is actually being consumed within the hospital environment, where do we have over inventory where we may actually run into product expiring on the shelf, where are we short, comparing our upcoming needs then to industry data that indicates where there may be shortages coming in the industry and based on that, making recommended buys to fill in the targeted formulary.

But it's this ability to sort of write down at a granular level, combine usage data, industry data, industry on shortages from ASHP and other sources and bring it all together to say, okay, these are the things you need to look after this week and get in here. No, generally speaking, I would say we're not yet seeing -- and I think it will be another few quarters before we see people turning into more automated agents.

You need time for trust to build in AI. I mean AI, as you know, it hallucinates, it makes mistakes.

It does what it does. And it's going to take a while for that sort of trust to build up and not just our platform, in AI in general, for people to be willing to say, okay, I don't -- I'm looking for more than a report and a dashboard from this thing.

I now want it to actually initiate action on its own. That's probably another couple of quarters.

There's a lot of interest in it, some experimentation, but I would say that's not yet widely deployed. And by the way, I think that's on our platform and others from what we're hearing from customers that the platforms just aren't ready for that level of trust.

This is Jack Durno on for Richard. Just wondering if -- maybe just a follow-up on TecsysIQ.

If you could just give some color on how you intend to monetize it? And then as it scales, maybe where we should expect it to show up in your KPIs?

Yes. I mean there's 2 factors.

You're talking specifically with TecsysIQ, right?

Yes, exactly.

Yes. Yes, there's kind of 2 ways to measure it.

We're looking at that ourselves. I mean on a simple go-forward basis, we're expecting to close a few agreements a quarter for the next several years and probably accelerating as we go into that.

Now what does that turn into? These platforms will likely add over a year, maybe $1 million to ARR per year as you roll forward.

So it's -- in that way, it's not huge. It could go higher than that.

It could go quite a bit higher than that, but that's kind of our baseline as we look to sort of layer this in on top. What I think is the bigger factor and the more exciting factor for us is we think it's going to drive all the rest of the ARR bookings because you end up with people now looking at a platform like ours and going, okay, wow, this thing can do a lot more than it used to.

I mean AI is useless without a vast amount of underlying data. Our platforms provide that vast amount of underlying data.

So when customers start to see what -- prospects start to see what AI can do, they end up realizing they need the underlying data platform. They need an enterprise end-to-end supply chain platform that supplies that data to the AI engine.

Otherwise, all the AI engine can do is hallucinate. So we think that this is a -- it does layer some bookings in on top of what bookings would otherwise be.

But we think what we're seeing is an acceleration across all of our types of bookings because of the additional ROI that an AI platform like TecsysIQ can provide. So we're -- I mean, what we're excited about is that I know there's a lot of fear in the market around AI.

What we're seeing is that for us, AI is a tailwind. It's definitely not a headwind.

It's looking pretty exciting.

Awesome. That's really good color.

I appreciate it. And then just on the -- I know last quarter, you mentioned that you were seeing in the last 12 months, I believe there was 2% churn in Elite customers.

I'm just wondering if that number has changed at all and if you're still seeing the same.

It's still under 2%.

Thank you, and thank you for taking the time to join us today. As always, if you have additional questions, don't hesitate to reach out to Mark or I, and we will look forward to talking to you at the end of June when we release our Q4 numbers.

Thanks. Have a great day.

Bye for now.