Tecsys (TSE:TCS) reported fiscal third-quarter results marked by record SaaS bookings and its highest adjusted EBITDA quarter to date, while management reiterated full-year guidance and outlined operational changes intended to improve leverage and fund ongoing investment in AI-enabled capabilities.
Record bookings, pipeline growth, and vertical momentum
Chief Executive Officer Peter Brereton said third-quarter fiscal 2026 SaaS revenue rose 17% year-over-year and adjusted EBITDA increased 43% versus the prior-year quarter, calling it the “highest adjusted EBITDA quarter in our company’s history.” He also said Tecsys delivered its largest third-quarter SaaS bookings quarter on record, achieved “without any migration bookings,” which management said highlighted demand for the company’s core offerings and the strength of its pipeline.
Healthcare drivers: compliance pressure, modernization, and pharmacy interest
Management emphasized the role of regulatory requirements and operational pressure in driving supply chain technology spending among healthcare providers. Brereton cited U.S. healthcare supply chain regulations including the Drug Supply Chain Security Act’s package-level traceability requirements and the 340B Program’s tracking and audit demands, noting that as enforcement tightens through 2026, compliance is becoming an operating imperative.
Brereton also described a market shift toward “more mindful evaluation” of AI, with buyers looking for partners that combine AI capabilities with vertical expertise. He said Tecsys’ healthcare solutions and its LEAP platform remain central drivers of SaaS ARR.
The company highlighted accelerating interest in its pharmacy offering. Brereton said the pipeline for its pharmacy inventory management system grew more than 200% year-over-year, supported by brand momentum, new industry research, and record engagement at a pharmacy summit in Houston. He said total registrations increased 77% year-over-year and participation from health system leaders rose 67%. He also referenced recent recognition from Modern Healthcare and RXinsider.
TecsysIQ launches commercially; early use cases centered on pharmacy
Brereton said TecsysIQ, the company’s AI intelligence layer, became commercially available in the third quarter. He described it as unifying data from multiple sources, including healthcare-specific sources such as ASHP (American Society of Health-System Pharmacists), GUDID (Global Unique Device Identification Database), and the U.S. Food and Drug Administration, to translate inputs like drug shortages, device identifier data, recalls, and safety alerts into actionable insights.
During the Q&A, Brereton said early uptake is most apparent in pharmacy, describing pilot environments where TecsysIQ is used to evaluate hospital consumption, identify overstock and impending expirations, flag shortages, and incorporate industry shortage information to help recommend targeted purchases. He said broader deployment of more automated “agents” is likely still a few quarters away as customers build trust in AI-driven actions.
On monetization, Brereton said the company expects to close “a few agreements a quarter” for several years, potentially accelerating, and provided a baseline view that these platforms could add roughly CAD 1 million to ARR per year, while also contributing indirectly by improving the ROI proposition of Tecsys’ broader platform. He characterized AI as a “tailwind” for Tecsys, not a headwind.
Financial results: SaaS growth, improved margins, and record profitability metrics
Chief Financial Officer Mark Bentler said the third quarter ended January 31, 2026. SaaS revenue increased 17% year-over-year to CAD 20.1 million (18% on a constant currency basis). SaaS ARR was CAD 83.3 million at quarter-end, up 10% year-over-year (16% constant currency). Elite SaaS ARR, which management described as the core product and predominant contributor to total SaaS ARR, grew 17% year-over-year (23% constant currency).
Sequentially, Bentler said SaaS ARR increased by CAD 2.2 million from the prior quarter, as record bookings were “partially offset” by roughly CAD 2.1 million of unfavorable foreign exchange impact and attrition among a small group of non-core customers previously discussed in the prior quarter. He said this known attrition would continue to moderate reported SaaS ARR growth over the next two quarters. In the Q&A, Bentler estimated the headwind at “around CAD 1 million over the next couple of quarters,” adding that Elite SaaS ARR should be viewed as the leading indicator of the core business.
Bentler also highlighted accelerating new logo activity, saying bookings from new logos were up over 150% in the last 12 months compared to the year-ago period. SaaS RPO was CAD 248.9 million at quarter-end, up 18% year-over-year (24% constant currency), which management said reflected bookings and renewals momentum.
Professional services revenue increased 8% year-over-year to CAD 15.0 million. Professional services backlog was CAD 36.0 million at quarter-end, down 19% year-over-year (14% constant currency) against a difficult comparison. Bentler said that based on backlog heading into the fourth quarter, the company expects fourth-quarter professional services revenue to be more similar to the third quarter than the prior-year fourth quarter (CAD 16.2 million).
Gross margin in the quarter was 51%, up from 47% a year earlier, driven by higher SaaS margins and strength in professional services margins. Net profit was CAD 1.7 million compared with CAD 1.2 million in the prior-year quarter, with basic and fully diluted EPS of CAD 0.12 versus CAD 0.08. Adjusted EBITDA was CAD 5.0 million compared to CAD 3.5 million a year ago; Bentler also said adjusted EBITDA was up 49% on a trailing twelve-month basis through the third quarter.
For the first nine months of fiscal 2026, Bentler reported SaaS revenue of CAD 58.9 million, up 21% year-over-year, and total revenue of CAD 143.1 million, up 10% (9% constant currency). Excluding hardware, overall revenue increased 13% (12% constant currency). Adjusted EBITDA for the first nine months rose to CAD 13.3 million from CAD 9.1 million in the prior-year period, and fully diluted EPS was CAD 0.29, up from CAD 0.18.
The company ended the quarter with CAD 36.2 million in cash and short-term investments and no debt. Bentler said Tecsys used about CAD 3.7 million to repurchase shares under its NCIB during the quarter and paid CAD 1.3 million in dividends. The board approved a quarterly dividend of CAD 0.09 per share.
Workforce reduction and reaffirmed fiscal 2026 guidance
After quarter-end, Tecsys implemented a workforce reduction of approximately 7% across multiple functions. Bentler said the action is expected to result in an estimated restructuring charge of CAD 4.5 million to be recorded in the fourth quarter and generate approximately CAD 8.1 million in annual operating cost savings. He said the reductions are intended to create flexibility to redirect resources into strategic growth initiatives, and he noted that the future operating cost profile will reflect both efficiencies and reinvestments.
In response to analyst questions, Bentler said the restructuring was aimed at “strengthening the business, not shrinking it,” with goals that include accelerating AI-driven productivity, improving sales execution, and increasing operating leverage. He added that the company expects minimal fiscal 2027 operating expense growth and ongoing margin expansion led by SaaS, and said Tecsys expects to provide fiscal 2027 guidance with its fourth-quarter earnings release.
For fiscal 2026, Tecsys reaffirmed its guidance for:
- SaaS revenue growth: 20% to 22%
- Total revenue growth: 8% to 10%
- Adjusted EBITDA margin: 8% to 9%
Looking ahead, Brereton said Tecsys plans to expand TecsysIQ with “the next wave of intelligent agents” aimed at automating routine and compliance-heavy work across supply chains, while also advancing AI-enabled productivity tools intended to streamline configuration and day-to-day tasks. He also said the company is planning its annual user conference, TUC 2026, in Nashville in early June, noting expectations for record customer attendance and partner sponsorship already exceeding targets.
About Tecsys (TSE:TCS)
Tecsys Inc is engaged in the development and sale of enterprise supply chain management software for distribution, warehousing, transportation logistics, point-of-use and order management. It also provides related consulting, education and support services. The company serves healthcare systems, services parts, third-party logistics, retail and general wholesale distribution industries. Geographically, it derives a majority of revenue from the United States and also has a presence in Canada and Other Countries.
