AND DECLARES QUARTERLY DIVIDEND
TORONTO, May 13, 2020 /CNW/ - Pivot Technology
Solutions, Inc. (TSX: PTG), ("Pivot", "Company"), a
full-service information technology provider, today announced
financial results for the three months ended March 31, 2020.
All figures are in Canadian dollars unless otherwise stated.
Prior to January 1, 2020, the
Company reported its results in U.S. dollars. Effective
January 1, 2020, Pivot's Board of
Directors elected to change the Company's presentation currency
from U.S. dollars to Canadian dollars. The change in presentation
currency is to improve investors' ability to compare the Company's
financial results with other Canadian publicly traded
businesses.
FIRST QUARTER OVERVIEW
- Adjusted EBITDA(1) increased 21.4% to $5.4 million, compared to $4.4 million in Q1 2019.
- Revenue was $376.8 million,
compared to $389.9 million in Q1
2019.
- Pivot-provided services revenue grew 19.9%.
- Gross profit increased 7.0% to $52.1
million, compared to $48.7
million in Q1 2019.
- Gross profit margin was 13.8%, compared to 12.5% in Q1
2019.
- Net income attributable to shareholders was $0.8 million, compared to a net loss of
$4.8 million in Q1 2019.
- Diluted earnings per share ("EPS") was $0.02 in Q1 2020, compared to a loss of
$0.12 in Q1 2019.
- The company paid dividends of $1.6
million during Q1.
1 Non-GAAP
Measure. See Non-GAAP Measures section of this news
release
|
"We are pleased with our performance in Q1, which is the
strongest Adjusted EBITDA(1) the Company has ever
reported in a first quarter. Adjusted EBITDA(1)
grew 21.4% when compared to Q1 of 2019. Gross profit dollars and
gross profit margin percent both grew in the period as well. In
addition, we are encouraged to see Pivot-provided services deliver
solid growth in the quarter. The 19.9% increase in
Pivot-provided services was driven by a number of wins with a major
U.S. customer," said Kevin Shank,
CEO.
"We continue to focus on building our core products and services
portfolio, while enhancing our services and solutions capabilities
from the Edge to the Cloud. By executing our strategy, we have
improved the efficiency of the business, lowered our Adjusted
Debt(1) levels, and the trending results are a testament
to the hard work of our team."
"Although it's difficult to predict long-term implications,
Pivot has managed well through the impacts of COVID-19 thus far,
with 93% of our employees working remotely and 7% being identified
as essential workers. Our highly remote workforce, diverse customer
base, and variable cost structure are helping us navigate
effectively through this unprecedented environment," added Mr.
Shank.
Q1 2020 BUSINESS AND OPERATING HIGHLIGHTS
- Commencing January 1, 2020, the
U.S. wholly-owned subsidiaries merged and began operating as a
combined entity.
- The Normal Course Issuer Bid ("NCIB") was utilized to
repurchase 824,115 shares during the first quarter at a cost of
$1.4 million.
- The Company paid dividends of $1.6
million during Q1 2020.
DIVIDEND
On May 12, 2020, the Board
declared a dividend of C$0.04 per
share payable on June 15, 2020 to
common shareholders of record on May 29,
2020. This dividend has been designated as an "eligible
dividend" for Canadian tax purposes.
FIRST QUARTER RESULTS SUMMARY
First quarter 2020 revenue was $376.8
million, a 3.3% decrease from the comparative period. This
decrease was primarily attributable to lower product sales to major
customers, partially offset by a favourable foreign exchange
effect, increases in Pivot-provided and third-party services, and
increased sales to non-major customers during the quarter.
Sales to non-major customers increased by 9.7% in the period.
Product sales of $327.5 million for Q1 2020 decreased 5.7% as
compared to Q1 2019. The decline in product sales is primarily due
to decreased sales to major customers.
Pivot-provided services of $28.7 million for Q1 2020 increased by
$4.8 million or 19.9% as
compared to Q1 2019. The improvement in Pivot-provided services is
primarily due to additional contract wins with a major U.S.
customer.
Third-party services of $20.5 million for Q1 2020 increased by
$2.1 million or 13.7% as
compared to Q1 2019. The increase in third-party services is
primarily driven by the timing of certain contracts and
renewals.
Gross profit of $52.1 million
for Q1 2020 increased by $3.4 million or 7.0% as compared to the same
period in the prior year. Gross profit margin was 13.8% in Q1 2020
as compared to 12.5% in Q1 2019. The improvement in gross profit
for Q1 2020 is mainly driven by the change in the customer mix and
services making up a larger portion of the Company's revenue.
During Q1 2020, the continued favourable shift in the customer mix
resulted in less revenue being generated from major customers,
partially offset by increased revenue from non-major customers.
Since the gross profit margin from non-major customers is generally
more favourable, Q1 2020 gross profit margins continued to benefit
from this shift. The growth in services revenue also helped
improve gross profit margins, as services generally have higher
margins than product sales.
Selling, general and administrative expenses ("SG&A") of
$46.7 million for Q1 2020
increased $2.4 million or 5.5%
as compared to the same period in the prior year. There were a
number of factors that impacted SG&A including: higher
commissions and variable compensation associated with higher gross
profit and Adjusted EBITDA(1), increase due to the
foreign exchange effect, costs associated with integrating the
business, including training, travel and marketing costs as well as
increased spend in growth areas of the business, partially offset
by cost reductions due to the sale of the Smart Edge business in Q4
of 2019.
Adjusted EBITDA(1) was $5.4
million in the first quarter, an increase of 21.4% over the
prior period.
IMPACT OF COVID-19 ON OUTLOOK
COVID-19 has affected industries in different ways. While some
customers have been negatively impacted, others have seen an
increase in demand. Independent of how a company is performing,
governments around the world have required that non-essential
offices be closed. As Pivot moves further into
2020, management has been able to delineate which operations and
resources will remain in demand and which areas will be idle or
less utilized. As a result, Pivot has taken specific actions
associated with resources that have become idle and has furloughed
a small percentage of employees through June
30, with the intention of bringing them back when the
business returns to a more normal pace.
Outside of the COVID-19 situation, management's outlook is that
some customers remain cautious in their approach to IT
investments. This outlook is consistent with the Company's
outlook for the past several quarters. In the future, if the
pandemic were to cause prolonged disruption to the Company's supply
chain or its services capabilities, it would have a negative impact
on revenue, which could be material. In addition, any significant
negative impact on revenue would impact profitability, as well as
liquidity and capital resources.
Management is closely monitoring how COVID-19 is affecting
Pivot's operations and is taking measures and precautions to help
protect and inform its employees. In addition, the Company is
monitoring trade discussions between the U.S. and China and the potential impact of tariffs;
however, the long-term impact of these discussions has not yet been
determined.
To date, the current conditions related to COVID-19 have not had
a material impact on the Company's overall business, although as
noted above, certain services that require direct access to
customer locations will be impacted. The situation is dynamic
and the impact of COVID-19 on the Company's future results of
operation cannot be reasonably estimated at this time. Management
continues to monitor and evaluate the situation and its impact on
the Company's business.
The Company's outlook is contained in its Management's
Discussion and Analysis ("MD&A") for the three months
ended March 31, 2020, which is
available at www.pivotts.com and at www.sedar.com.
SELECTED FINANCIAL INFORMATION AND OPERATING RESULTS
(unaudited)
|
Three months ended
March 31,
|
(in thousands of
Canadian dollars, except per share amounts)
|
2020
|
2019
|
|
|
(re-presented in
Canadian dollars)
|
Revenue
|
376,807
|
389,861
|
Cost of
sales
|
324,717
|
341,170
|
Gross
profit
|
52,090
|
48,691
|
Selling, general and
administrative expenses
|
46,699
|
44,251
|
Income before
depreciation and amortization, finance expense, change
in fair value of liabilities and other
expenses
|
5,391
|
4,440
|
Depreciation and
amortization
|
4,691
|
4,995
|
Finance
expense
|
1,744
|
2,216
|
Change in fair value
of liabilities
|
9
|
308
|
Other
expenses
|
447
|
4,145
|
Loss before income
taxes
|
(1,500)
|
(7,224)
|
Income tax
recovery
|
(2,484)
|
(1,907)
|
Net income (loss)
for the period
|
984
|
(5,317)
|
Other
comprehensive income (loss)
|
|
|
Items that may be
reclassified subsequently to income (loss):
|
|
|
Exchange gain (loss)
on translation of foreign operations
|
1,167
|
(313)
|
Total
comprehensive income (loss)
|
2,151
|
(5,630)
|
Attributable
to:
|
|
|
Shareholders
|
1,964
|
(5,076)
|
Non-controlling
interest
|
187
|
(554)
|
Total
comprehensive income (loss)
|
2,151
|
(5,630)
|
Attributable to
shareholders:
|
|
|
Earnings (loss)
attributable to shareholders
|
797
|
(4,763)
|
Earnings (loss) per
common share
|
|
|
Basic ($)
|
$0.02
|
($0.12)
|
Diluted
($)
|
$0.02
|
($0.12)
|
Certain
comparative information has been reclassified to conform to current
year presentation.
|
The following is a summary of selected consolidated financial
information for the past eight quarters.
(in thousands of
Canadian dollars
|
2020
|
|
2019
|
|
2018
|
except
otherwise noted)
|
Q1
|
|
Q4
|
Q3
|
Q2
|
Q1
|
|
Q4
|
Q3
|
Q2
|
|
|
|
(re-presented in
Canadian dollars)
|
Revenue
|
376,807
|
|
402,477
|
352,404
|
459,902
|
389,861
|
|
395,872
|
417,094
|
489,589
|
Gross
profit
|
52,090
|
|
56,646
|
52,209
|
60,105
|
48,691
|
|
56,063
|
53,208
|
52,425
|
Gross profit
margin
|
13.8%
|
|
14.1%
|
14.8%
|
13.1%
|
12.5%
|
|
14.2%
|
12.8%
|
10.7%
|
Adjusted
EBITDA(1)
|
5,391
|
|
9,868
|
8,319
|
12,939
|
4,440
|
|
6,271
|
5,424
|
6,545
|
Adjusted
EBITDA(1)margin
|
1.4%
|
|
2.5%
|
2.4%
|
2.8%
|
1.1%
|
|
1.6%
|
1.3%
|
1.3%
|
Net income
(loss)
|
984
|
|
21,676
|
502
|
1,341
|
(5,317)
|
|
(33)
|
(3,205)
|
311
|
Net income (loss)
attributable
to shareholders
|
797
|
|
21,574
|
(412)
|
2,133
|
(4,763)
|
|
571
|
(3,639)
|
243
|
Earnings (loss) per
share
attributable to shareholders:
|
|
|
|
|
|
|
|
|
|
|
Basic ($)
|
$0.02
|
|
$0.55
|
($0.01)
|
$0.05
|
($0.12)
|
|
$0.01
|
($0.09)
|
$0.01
|
Diluted
($)
|
$0.02
|
|
$0.54
|
($0.01)
|
$0.05
|
($0.12)
|
|
$0.01
|
($0.09)
|
$0.01
|
Cash dividends
declared on
common shares
|
1,556
|
|
1,585
|
1,586
|
1,579
|
1,579
|
|
1,579
|
1,579
|
1,596
|
Certain
comparative information has been reclassified to conform to current
year presentation.
|
The following is a reconciliation of "income (loss) before
income taxes" to "Adjusted EBITDA(1)".
|
2020
|
|
2019
|
|
2018
|
(in thousands of
Canadian dollars)
|
Q1
|
|
Q4
|
Q3
|
Q2
|
Q1
|
|
Q4
|
Q3
|
Q2
|
|
|
|
(re-presented in
Canadian dollars)
|
Income (loss)
before income taxes
|
(1,500)
|
|
29,622
|
507
|
4,540
|
(7,224)
|
|
841
|
(2,921)
|
889
|
Depreciation and
amortization
|
4,691
|
|
4,576
|
4,862
|
4,978
|
4,995
|
|
3,670
|
3,741
|
3,695
|
Finance
expense
|
1,744
|
|
1,841
|
1,922
|
2,018
|
2,216
|
|
1,989
|
1,997
|
2,283
|
Change in fair value
of liabilities
|
9
|
|
725
|
294
|
279
|
308
|
|
301
|
293
|
201
|
Other expenses
(income)
|
447
|
|
(26,896)
|
734
|
1,124
|
4,145
|
|
(530)
|
2,314
|
(523)
|
Adjusted
EBITDA(1)
|
5,391
|
|
9,868
|
8,319
|
12,939
|
4,440
|
|
6,271
|
5,424
|
6,545
|
Certain
comparative information has been reclassified to conform to current
year presentation.
|
Key metrics on consolidated debt
Adjusted Debt(1)
|
|
|
|
March 31,
|
December 31,
|
(in thousands of
Canadian dollars)
|
2020
|
2019
|
Current
liabilities
|
599,049
|
492,330
|
Other financial
liabilities – long-term
|
15,553
|
14,999
|
Less: Lease
obligations – total
|
(19,667)
|
(18,769)
|
Less: Current
assets
|
(516,997)
|
(415,626)
|
Adjusted
debt
|
77,938
|
72,934
|
Adjusted Debt(1) is a non-GAAP measure.
This measure normalizes the impact of the changes in working
capital. Management believes it is a more relevant indicator of the
Company's debt position and is a more comparable metric with
industry peers. The increase of Adjusted
Debt(1) in 2020 was mainly due to foreign
exchange; excluding the foreign exchange effect, Adjusted
Debt(1) was $72.0 million as at March 31, 2020.
Below are the key metrics of our consolidated debt as at
March 31, 2020 and December 31, 2019.
|
|
|
|
March 31,
|
December 31,
|
|
2020
|
2019
|
Adjusted
Debt(1) to Adjusted
EBITDA(1)
|
2.13
|
2.05
|
Net interest
coverage(1)
|
4.85
|
4.45
|
"Net Interest Coverage" is defined as Adjusted EBITDA
divided by finance expense on a trailing twelve-month
basis.
The change in Adjusted Debt(1) to Adjusted
EBITDA(1) at March 31,
2020 was due to foreign exchange; excluding the foreign
exchange effect, Adjusted Debt(1) to Adjusted
EBITDA(1) was 1.98 as at March 31, 2020, reflecting an improvement in this
metric. The improvement in net interest coverage reflects the
higher Adjusted EBITDA(1) and lower net finance
expense as at March 31, 2020 on a
trailing 12-month basis as compared to the same trailing 12-month
period in the prior year.
NON-GAAP MEASURES
The Company evaluates and measures its performance based on
measures referred to as "Adjusted EBITDA", "Adjusted Debt",
"Adjusted Debt to Adjusted EBITDA", and "Net Interest Coverage".
These measures do not have any standardized meaning prescribed by
GAAP and; therefore, may not be comparable to similar measures
presented by other issuers. Such non-GAAP measures should not be
considered in isolation or as a substitute for measures of
performance prepared in accordance with GAAP such as net income
(loss), cash flow, or other measures of financial performance and
liquidity reported in accordance with GAAP. Detailed descriptions
of these terms can be found in Pivot's disclosure documents,
including its Management's Discussion and Analysis, filed with the
securities regulatory authorities; these documents are available at
www.sedar.com or on Pivot's website www.pivotts.com.
FIRST QUARTER CONFERENCE CALL
At 8:30 a.m. Eastern Thursday, May 14, 2020, the Company will host a
conference call featuring management's quarterly remarks and a
follow-up question and answer period with analysts. The conference
call can be accessed live by dialing (416) 764-8659 five
minutes prior to the scheduled start time.
A telephone recording of the call will be available for one
week (until midnight May 21, 2020) by
dialing (416) 764-8677 and entering passcode 846207 followed by the
number sign.
ABOUT PIVOT TECHNOLOGY SOLUTIONS
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 original equipment manufacturer (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.
FORWARD LOOKING STATEMENTS
Information in this release contain forward-looking
statements, including statements concerning anticipated financial
events, results, performance or expectations relating to the
Company operations, financial condition, business strategy and the
IT market in 2020 and the impact of the COVID-19 pandemic on the
Company's results of operations. Forward-looking statements
are based on assumptions of future events that the Company believes
are reasonable based upon information currently available, and
Pivot assumes no obligation to update or revise any
forward-looking statement, except as required by applicable
securities law. These statements are not guarantees
of future performance and involve known and unknown risks,
uncertainties and other factors, and actual results could
vary significantly from those expressed or implied in these
statements. Readers are cautioned that assumptions used in
the preparation of such information may prove to be incorrect.
Further information with respects to the risks and uncertainties
can be found in the MD&A for the three months ended
March 31, 2020 and the Annual
Information Form for the year ended December
31, 2019, available at www.sedar.com and on Pivot's website
at www.pivotts.com.
SOURCE Pivot Technology Solutions, Inc