Echelon Capital Markets analyst Amr Ezzat’s view of Tecsys (Tecsys Stock Quote, Chart, News, Analysts, Financials TSX:TCS) has tightened a bit, with the analyst maintaining his “Buy” rating but lowering his target price in an update to clients on Thursday. Founded in 1983, Tecsys develops and sells enterprise supply chain management software for distribution, warehousing, transportation logistics, point-of-use and order management, with clientele including healthcare systems, services parts, third-party logistics, retail and general wholesale distribution industries. Ezzat’s latest update comes after Tecsys reported its third quarter financial results for the 2022 fiscal year, which Ezzat noted to be in line with expectations. “The quarter reflected continued aggressive adoption and deployment of SCM software,” Ezzat said. “Management is looking to increase the Company’s headcount on the back of a robust sales pipeline.” The company’s quarterly results were headlined by $35.4 million in revenue, roughly in line with the Echelon estimate of $35.9 million and the consensus projection of $35.3 million. The figure also represented a 10.9 per cent year-over-year increase, with constant currency taking that figure to 16 per cent. Professional services continue to be the biggest revenue driver for Tecsys at 36.5 per cent of the revenue mix and up 5.1 per cent year-over-year, while sales made the biggest annual jump, rising 48.7 per cent to $7 million, which represents 19.8 per cent of the company’s revenue mix. As of January 31, the company’s ARR has also gone up 17.2 per cent year-over-year, reporting at $59.5 million compared to the $50.8 million reported at the same time in 2021. However, on account of unfavourable foreign exchange impacts, the company’s adjusted EBITDA came in at $2.7 million, slightly missing on the consensus estimate of $2.9 million and the Echelon projection of $3.3 million. The EBITDA margin came in at 7.7 per cent for the quarter, down sequentially from 9.4 per cent, and down further from the 12.4 per cent margin reported in the same quarter of 2021. "This quarter happened in the middle of a challenging global environment with the Omicron wave hitting many of our customers very hard in late December and January. We were pleased to see the quarter come in strong as the twelfth consecutive quarter of record revenue. We added another hospital network in the quarter and saw strong bookings from our base, as well. This solid growth trajectory is a strong testament to our greatest asset, the people of Tecsys, and our truly adaptable agile solutions helping our customers succeed in a climate where excellence in supply chain execution is a key driver for success," said Peter Brereton, president and CEO of Tecsys in the company’s March 2 press release. "Our pipeline continues to swell with new customer opportunities and as the pandemic seems to be finally fading away, Q4 is off to a strong start," he said. In order to account for the company’s increased pace of opex spending as well as foreign exchange headwinds, Ezzat has revised some of his short-term and medium-term projections for the company. From a revenue perspective, Ezzat has lowered his 2022 projection from $140.6 million to $138.9 million, with the new figure still representing a potential year-over-year increase of 12.8 per cent. Meanwhile, Ezzat slightly lowered his 2023 projection from $166 million to $164 million, with the new target still marking a year-over-year increase of 18.1 per cent. From a valuation perspective, Ezzat forecasts the company’s EV/Sales multiple to drop from 3.8x in 2021 to a projected 3.3x in 2022, then to a projected 2.8x in 2023. With the same headwinds in mind, Ezzat has also reduced his EBITDA projections, lowering his 2022 figure from $12.9 million to $11.5 million to imply a margin of 8.3 per cent, though the monetary figure itself is down 29 per cent from the $16.2 million reported in 2021. Looking ahead to 2023, Ezzat again lowered his EBITDA expectation from $20.2 million to $17.8 million, implying a margin of 10.9 per cent. In terms of valuation, Ezzat projects the company’s EV/EBITDA multiple to rise from 28.5x in 2021 to a projected 40.3x in 2022, then going back down to a projected 25.9x in 2023. “We remain bullish on TCS and believe there is more upside to be had from current levels,” Ezzat said. "We are fine tuning our target price to $62.00/shr from $65.00/shr on a slightly lower short-term margin profile." Tecsys has seen its stock price tumble to a 35.2 per cent loss over the last 12 months, with a more pronounced 40.1 per cent loss since the start of 2022. Since hitting a 52-week high of $59.73/share on October 19, the stock has lost nearly half its value, as it opened Friday trading at a 52-week low of $31.99/share. At press time, Ezzat's new $62/share target represented a potential 12-month return of 83.2 per cent.