Supply Chain Tech Stock Could Get a ‘Shot in the Arm’ From the COVID Vaccine Rollout

Tecsys Inc. (TSX:TCS) has the potential to dominate the $600 million healthcare supply chain management space

Capital Ideas Media | February 5, 2021 | SmallCapPower: Supply chain management, which ensures the efficient flow of goods starting from gathering the raw materials all the way to delivery of the final product, has become essential in our increasingly complex global commercial ecosystem.

(Originally published on Capital Ideas Media on December 15, 2020)

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Canadian company Tecsys Inc. (TSX:TCS) develops and sells enterprise-wide supply chain management software for distribution, warehousing, and transportation logistics, targeting primarily the North American market.

[Editor’s Note: Shares of Tecsys have climbed 19% since Capital Ideas wrote about the company about six weeks ago.]

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The company recently reported better-than-expected Q2 Fiscal 2021 revenue that rose 18% year over year to $30.7 million, its seventh consecutive quarterly top-line record. About 63% of its sales during the past year came from the United States and Tecsys has more than 1000 customers worldwide.

Recurring revenue, though, continues to be the focus at Tecsys, as its annual recurring revenue climbed 26% year over year to $50.9 million, which it attributed primarily to eCommerce proliferation.

As well, higher-margin SaaS (software as a service) revenue continues to be the Company’s fastest-growing revenue stream (now accounting for 17% of sales), with trailing twelve month SaaS bookings surging 159% from a year earlier. The Company’s transition to a SaaS business model is expected to drive accelerated organic growth.

Tecsys also recorded a second-quarter profit of $2.1 million or $0.14 per share, up from $1.4 million, or $0.11 per share, during the same period last year.

Cormark Securities analyst Gavin Fairweather wrote recently that Tecsys is having conversations on potential opportunities to provide software to manage the distribution of COVID-19 vaccines.

“Its solution is compliant with drug supply chain security act requirements and can handle cold chain deployments. The R&D team has also developed a point-of-use application to track the delivery of the vaccine,” he said, adding that potential revenue from this could be “meaningful.”

Tecsys does have experience in this area, says Laurentian Bank Securities analyst Nick Agostino, who noted that the Company was involved in the H1N1 vaccine rollout in the US over a period of about a year in 2009.

Mr. Agostino noted that Tecsys continues to explore M&A opportunities within the US healthcare supply chain management space, as well as “expanding its geographical reach in Europe and Asia to complement organic growth.” The global healthcare supply chain management sector is estimated to be a $600 million market opportunity.

Finally, Tecsys investors have benefitted from the Company’s tight capital structure (just 14.4 million shares outstanding), about 26% of which are owned by Company insiders.

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