TORONTO, Aug. 8, 2017 /CNW/ - Pivot Technology
Solutions, Inc. (TSX: PTG), ("Pivot" or the "Company") a
full-service information technology provider, today reported
financial results for the three and six months ended June 30, 2017 and declared a quarterly
dividend.
Second Quarter Overview (in US dollars unless otherwise
stated)
- Revenue was $402.4 million, up
14.8% from $350.6 million in Q2 2016
excluding GTS1 on growth in product and services revenue
of 15.1% and 12.2%, respectively
- Gross profit was $43.0 million,
down 3.2% from $44.4 million in Q2
2016 excluding GTS1
- Gross profit margin was 10.7%, compared to 12.7% in Q2 2016
excluding GTS1
- Adjusted EBITDA2 was $7.3
million down from $9.2 million
in Q2 excluding GTS1
- Diluted earnings per share were $0.05 compared to net loss per share of
$0.01 in Q2 2016
- The Company paid $1.2 million in
common share dividends
First Half Overview (in US dollars unless otherwise
stated)
- Revenue was $732.2 million, up
11.1% from $659.3 million in the
first six months of 2016 excluding GTS1
- Gross profit was $77.1 million,
down 3.3% from $79.7 million a year
ago excluding GTS1
- Gross profit margin was 10.5% compared to 12.1% a year ago
excluding GTS1
- Adjusted EBITDA2 was $5.7
million compared to $10.4
million a year ago excluding GTS1
- Loss per share was $0.05 compared
to a loss per share of $0.10 a year
ago
- The Company paid $2.4 million in
common share dividends
1 2016
figures in these highlights exclude the results of GTS Technology
Solutions, Inc. ("GTS"), formerly known as Austin Ribbon &
Computer Supplies, Inc. The assets and liabilities of GTS were
derecognized on July 1, 2016. Results excluding GTS are a non-IFRS
measure. See the Second Quarter Results Overview and the Non-IFRS
Measures sections of this news release for more information and for
2016 results including GTS.
|
2 Non-IFRS
Measure. See Non-IFRS Measures section of this news
release.
|
Management Commentary
"Revenue increased nicely in
the second quarter as Pivot used its product and services
strategies to capitalize on stronger customer buying activity and
benefitted from TeraMach's contribution," said Kevin Shank, President and Chief Executive
Officer. "We also achieved solid profitability despite less
favourable sales mix and rebates as we held the line on our
SG&A costs. From a strategic perspective, we continue to invest
in growing our services capabilities and driving our commercial
transformation even though this investment does dampen short-term
earnings. We launched our commercial transformation in Q1,
and continued to build our pipeline of opportunities during
Q2. The types of opportunities we are now pursuing are more
significant than those Pivot was pursuing prior to the launch of
this transformation. We are well positioned to capture profitable
new business in a growing market for our IT products and
services."
In commenting on performance, David
Toews, Interim Chief Financial Officer said, "Last fall and
again to date this year, we've constrained spending so that even
with the addition of TeraMach's cost base, SG&A increased just
1.2% over last year's second quarter compared to almost 15% revenue
growth. While we were satisfied with this performance,
we must continue to focus on cost effectiveness so that more
revenue dollars can fall to our bottom line while we continue to
invest selectively in our stated strategies."
Dividend Declaration
At its meeting today, the
Company's Board of Directors declared a quarterly dividend of
C$0.04 per common share, payable
September 15, 2017 to common
shareholders of record August 31,
2017.
Second Quarter Results Overview (in thousands of US dollars
except per share amounts)
Second quarter 2017 revenue was $402.4
million, 7.7% or $28.7 million
above the same period in 2016. Excluding GTS (which
contributed to Q2 2016 revenue but not Q2 2017 revenue), revenue
increased 14.8% or $51.8 million due
primarily to higher sales to major customers of $15.3 million and TeraMach's contribution of
$12.8 million. Results excluding GTS
are a non-IFRS measure. See non-IFRS measures section of this news
release.
Total product revenue in the second quarter of 2017 was
$363.0 million, up 8.7% from
$333.8 million. Excluding GTS from
the comparative period of 2016, product revenue increased
$47.5 million or 15.1% compared to
last year. Approximately 23.5% of this increase was due to the
inclusion of TeraMach.
Total second quarter service revenues were $39.4 million, down 1.2% from $39.9 million in the same period of 2016.
Excluding GTS from the comparative period of 2016, service revenues
increased $4.3 million or 12.2%
compared to last year. 38.5% of this increase was due to the
inclusion of TeraMach. Revenue from the Company's own service
portfolio achieved year-over-year growth of 10.4% as the Company
continued to implement its services strategy across its larger
customer base including at TeraMach.
In general, changes in revenue quarter over quarter are
attributable to a number of factors, including, but not limited to,
timing of major projects and replenishments, vendor incentive
programs, competitive pressures in the market, timing of service
delivery, business seasonality and the mix in revenue between large
and smaller customers. In the second quarter, major customers
accounted for 38.4% of revenue compared to 39.7% in Q2 2016,
excluding GTS.
Second quarter 2017 cost of sales was $359.5 million compared to $327.1 million a year ago, a 9.9% increase.
Excluding GTS from the comparative period of 2016, cost of sales
increased $53.2 million or 17.4%
compared to last year. Gross profit for the second quarter of 2017
was $42.9 million (10.7% gross
margin) compared to $46.6 million
(12.5% gross margin) a year ago. Excluding GTS from the comparative
period in 2016, gross profit decreased $1.4
million or 3.2% while gross margin decreased from 12.7% to
10.7%. Gross profit and margin performance reflected lower margins
on sales to major customers due to product mix, as well as lower
vendor incentives recognized in the quarter.
Selling, general and administrative ("SG&A") expenses in the
second quarter were $35.7 million,
$1.9 million or 4.9% lower than a
year ago. Excluding GTS from the comparative period of 2016,
SG&A expenses were $0.4 million,
or 1.2% higher, reflecting the inclusion of the TeraMach expense
base, which was almost fully offset by cost reduction efforts.
Adjusted EBITDA (see non-IFRS measures) in the second quarter of
2017 was $7.3 million compared to
$9.1 million a year ago, a 20.1%
decrease. Excluding GTS from the comparative period of 2016,
Adjusted EBITDA was $1.9 million or
20.3% lower as a result of lower gross margins and despite
constraining growth in SG&A.
Net income for the second quarter was $2.0 million ($0.05
cents per diluted share) compared to net loss of
$0.2 million or a loss of
$0.01 cents per share in the second
quarter of 2016.
Share Repurchases
During the second quarter, the
Company repurchased and cancelled 920,313 shares from its former
directors at a discount to market trading prices. Subsequent to the
end of the second quarter, the Company also repurchased and
cancelled 36,500 shares pursuant to its Normal Course Issuer Bid
("NCIB") that began on June 22, 2017.
Under the NCIB, Pivot may purchase for cancellation up to 3,820,852
common shares of the Company or approximately 10% of the Company's
total public float at prevailing market prices, in accordance with
the rules of the Toronto Stock Exchange. The NCIB will continue
until June 21, 2018, unless completed
or terminated earlier. At June 30,
2017, the Company had 40,392,770 common shares issued and
outstanding. At August 7, 2017, the
Company had 40,356,270 common shares issued and
outstanding.
Looking Forward
The Company's outlook is contained in
its MD&A for the three and six months ended June 30, 2017.
"Pivot has an excellent foundation and a comprehensive approach
designed to build on that foundation to deliver customer and
shareholder value," said Mr. Shank. "Although we are still early in
our commercial transformation, we are gaining experience with our
strategies and our confidence level is increasing as we begin to
validate our approach in the marketplace. We expect to see further
evidence of progress in the second half of 2017 and while some
customers remain cautious in their spending, we have taken note of
improving economic conditions in the Canadian marketplace, which is
positive for TeraMach. While growing revenues and investing in our
strategies, we will also continue to apply our cost containment
measures to drive higher margins and free cash flow."
Second Quarter Conference Call
At 8:30 a.m. eastern Wednesday, August 9, 2017, the Company will host
a conference call featuring management's quarterly remarks and
follow-up question and answer period with analysts. The conference
call can be accessed live by dialing (647) 427-7450 five minutes
prior to the scheduled start time.
A telephone recording of the call will be available for one week
(until midnight August 16, 2017) by
dialing (416) 849-0833 and entering passcode 62774665 followed by
the number sign.
Quarterly Results Materials
The complete report for
the second quarter and first six months of 2017, including the
MD&A and unaudited interim condensed consolidated financial
statements, is available at www.pivotts.com.
SELECTED FINANCIAL INFORMATION AND OPERATING RESULTS
|
Three months ended
June 30,
|
Six months ended
June 30,
|
|
(unaudited)
|
(unaudited)
|
|
2017
|
2016
|
2017
|
2016
|
|
|
|
|
|
|
|
Revenue
|
402,430
|
373,708
|
732,224
|
706,495
|
|
Cost of
sales
|
359,480
|
327,072
|
655,148
|
621,856
|
Gross
profit
|
42,950
|
46,636
|
77,076
|
84,639
|
|
Employee compensation
and benefits
|
28,954
|
29,320
|
57,158
|
59,077
|
|
Other selling,
general and administrative expenses, net
|
6,704
|
8,193
|
14,176
|
14,988
|
Income before the
following:
|
7,292
|
9,123
|
5,742
|
10,574
|
|
Depreciation and
amortization
|
2,766
|
2,979
|
5,577
|
5,858
|
|
Finance
expense
|
1,279
|
1,147
|
2,361
|
2,185
|
|
Change in fair value
of liabilities
|
33
|
22
|
(74)
|
705
|
|
Other
expense
|
646
|
3,572
|
1,430
|
5,206
|
Income (loss)
before income taxes
|
2,568
|
1,403
|
(3,552)
|
(3,380)
|
|
Provision for
(recovery of) income taxes
|
610
|
1,618
|
(1,323)
|
590
|
Income (loss) for
the period
|
1,958
|
(215)
|
(2,229)
|
(3,970)
|
|
|
|
|
|
Income (loss) for the
period attributable to non-controlling interests
|
(72)
|
65
|
(123)
|
107
|
Income (loss) for the
period attributable to shareholders
|
2,030
|
(280)
|
(2,106)
|
(4,077)
|
|
|
|
|
|
Other
comprehensive income (loss)
|
|
|
|
|
Items that
may be reclassified subsequently to income (loss) for the
period:
|
|
|
|
|
|
Exchange gain (loss)
on translation of foreign operations
|
(1)
|
-
|
2
|
-
|
|
(1)
|
-
|
2
|
-
|
Total
comprehensive income (loss) attributable to
shareholders
|
2,029
|
(280)
|
(2,104)
|
(4,077)
|
|
|
|
|
|
Income (loss) per
common share:
|
|
|
|
|
|
|
|
|
|
Income (loss)
available to common shareholders
|
2,030
|
(280)
|
(2,106)
|
(4,077)
|
|
|
|
|
|
Basic
|
$
|
0.05
|
$
|
(0.01)
|
$
|
(0.05)
|
$
|
(0.10)
|
Diluted
|
$
|
0.05
|
$
|
(0.01)
|
$
|
(0.05)
|
$
|
(0.10)
|
|
|
|
|
|
Total
assets
|
519,117
|
501,875
|
519,117
|
501,875
|
Total current
non-financial liabilities
|
35,084
|
39,454
|
35,084
|
39,454
|
Cash dividends
declared on common shares
|
1,194
|
1,312
|
2,439
|
2,261
|
Notes: Amounts
presented are in thousands of U.S. dollars, except per share
amounts
|
Non-IFRS Measures
In this news release, management
uses certain non-IFRS measures to evaluate the performance of the
Company. The term "Adjusted EBITDA" does not have any standardized
meaning prescribed within IFRS and therefore may not be comparable
to similar measures presented by other companies. Such measures
should not be considered in isolation or as a substitute for
measures of performance prepared in accordance with IFRS such as
net income. Adjusted EBITDA is defined as gross profit less selling
and administrative expenses, and corresponds to income before tax,
depreciation and amortization, finance expense, change in fair
value of liabilities, and other expense.
Management believes that Pivot shareholders and potential
investors use these additional non-IFRS financial measures in
making investment decisions and measuring operational results as
they demonstrate the Company's ability to generate liquidity
through operating cash flow to fund working capital needs, service
outstanding debt and fund future capital expenditures.
A reconciliation of Adjusted EBITDA to net income is shown
below. Commencing July 1, 2016, GTS'
results of operations were no longer included in the Company's
results. Where GTS' results of operations are excluded from Q2 2016
measures in this news release, corresponding measures, including
GTS' results of operations are also presented.
|
Three months ended
June 30,
|
Six months ended
June 30,
|
|
(unaudited)
|
(unaudited)
|
|
2017
|
2016
|
2017*
|
2016*
|
2017
|
2016
|
2017*
|
2016*
|
|
|
|
|
|
|
|
|
|
Income (loss)
before income taxes
|
2,568
|
1,403
|
2,568
|
1,445
|
(3,552)
|
(3,380)
|
(3,552)
|
(3,560)
|
Depreciation and
amortization
|
2,766
|
2,979
|
2,766
|
2,969
|
5,577
|
5,858
|
5,577
|
5,842
|
Finance
costs
|
1,279
|
1,147
|
1,279
|
1,146
|
2,361
|
2,185
|
2,361
|
2,169
|
Change in fair value
of liabilities
|
33
|
22
|
33
|
22
|
(74)
|
705
|
(74)
|
705
|
Other
expenses
|
646
|
3,572
|
646
|
3,572
|
1,430
|
5,206
|
1,430
|
5,206
|
Adjusted
EBITDA
|
7,292
|
9,123
|
7,292
|
9,154
|
5,742
|
10,574
|
5,742
|
10,362
|
Notes:
Amounts presented are in thousands of U.S. dollars
|
*Amounts exclude GTS results of operations
|
Forward Looking Statements
This news release
contains statements that, to the extent they are not recitations of
historical fact, may constitute "forward-looking statements" within
the meaning of applicable Canadian securities laws. Forward-looking
statements include statements regarding revenue growth, stronger
performance in the second half of 2017, improved cost effectiveness
and the assumptions underlying any of the foregoing. Pivot uses
words such as "may", "would", "could", "will", "likely", "expect",
"believe", "intend", "anticipate" and similar expressions to
identify forward-looking statements. Any such forward-looking
statements are based on assumptions and analyses made by Pivot in
light of its experience and its perception of historical trends,
current conditions and expected future developments, including the
assumption that the Company's business strategies will positively
impact results of operations commencing in the second half of 2017,
as well as other factors Pivot believes are appropriate under the
relevant circumstances. However, whether actual results and
developments will conform to Pivot's expectations and predictions
is subject to any number of risks, assumptions and
uncertainties. Many factors could cause Pivot's actual
results to differ materially from those expressed or implied by the
forward-looking statements contained in this news release. These
factors include, without limitation: uncertainty in the global
economic environment; the possibility that Pivot will be unable to
capitalize on opportunities it has identified in the manner and
timeframe anticipated, the possibility that Pivot will not be able
to successful in sustaining growth or growing its profitability and
that cost containment measures may not be as effective as
anticipated. The "forward-looking statements" contained
herein speak only as of the date of this news release and, unless
required by applicable law, the Company undertakes no obligation to
publicly update or revise such information, whether as a result of
new information, future events or otherwise.
About Pivot Technology Solutions, Inc.
Pivot is an
industry leading information technology services and solutions
provider to many of the world's most successful companies,
including members of the Fortune 1000, as well as governments and
educational institutions. By leveraging its extensive OEM
partnerships and its own fulfillment, professional, deployment,
workforce and managed services, Pivot supports the IT
infrastructure needs of its clients. For more information, visit
www.pivotts.com.
SOURCE Pivot Technology Solutions, Inc