TECSYS Enhances its Standard Software Maintenance Policy Resulting in Positive Revenue Recognition Impact
MONTREAL (September 14, 2007) – TECSYS Inc. (TSX: TCS), an industry-leading supply chain management software company announced today that the Company’s board of directors has approved an important enhancement to the Company’s software license and maintenance agreement. New customers licensing TECSYS’ software will now purchase annual maintenance on an optional rather than mandatory basis. This change provides TECSYS’ customers with more flexibility and enables TECSYS to recognize license revenue upon conclusion of an agreement and shipment of the software compared to recognizing license revenue rateably over the support period generally over a period of twelve months; all according to TECSYS’ published policy for revenue recognition (see TECSYS’ 2007 Annual Report).
“There is no change to the customer service and support that we offer to our customers,” stated Peter Brereton, President and CEO of TECSYS Inc. “We needed more flexibility for our sales organization to compete on a level playing field with our competitors in the supply chain management software industry. Although virtually all of our clients opt for our on-going annual maintenance, we wanted to provide them with options. We estimate a net positive impact of approximately $900,000 in net earnings in fiscal year 2008 compared to subsequent years or $0.07 cents per share based on the current number of outstanding common shares of approximately 13.4 million shares. This is because revenue on most new license sales will be recognized in the current quarter while some deferred license revenue from previous sales continues to be recognized over twelve months.”
At the end Q1 of fiscal year 2008, deferred revenue amounted to $2.2M up from $1.7M at the end of the fourth quarter and $1.0M at the end of the first quarter of fiscal year 2007; an increase of $456K and $1.2M respectively. Deferred revenue is generally license revenue that is not recognized immediately but amortized over a period of twelve months from the date of signing the agreement with the customer.
Source: Tecsys
