/NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR
DISSEMINATION IN THE UNITED
STATES/
VANCOUVER and TORONTO, March 28,
2019 /CNW/ - Converge Technology Solutions Corp.
("Converge" or "Company") (TSXV:CTS) (FSE:0ZB), a
Hybrid IT solutions provider ("ITSP"), is pleased to provide its
financial results for the three and twelve months ended
December 31, 2018. All figures
are in CAD dollars unless otherwise stated.
"We are very pleased with the results from our first full
year of operations, having successfully completed phase one of our
long-term growth strategy," stated Shaun Maine, Chief Executive Officer of
Converge. "With five transactions completed over the course of
2018, each covering its own segment of the ITSP market, we ended
the year with revenue of $459 million
and Adjusted EBITDA1 $16.5
million. In the fourth quarter, we achieved revenue of
$136.1 million and gross margin of
22.3% with Adjusted EBITDA1 of $5.8 million. We remain committed to our
strategy of accretive acquisitions while remaining profitable.
As well, we continue to see an increase in spend from our
clients in both managed services and our public cloud offerings,
which are both critical components of our strategy."
Mr. Maine continued, "As we look ahead to 2019, after having
completed our January 2019
acquisition of Software Information Systems, we are extremely
excited to realize the benefits of our cross-selling strategy among
Converge companies, having already seen significant opportunities
arise on this front. Furthermore, our backlog of acquisitions
remains strong while we maintain our strategy of both organic
growth and growth through strategic acquisitions."
Fiscal Year 2018 Financial Highlights
Fiscal year 2018 was the Company's first full year of
operations. Accordingly, there is no comparable period analysis for
fiscal year 2018.
- Revenue for the twelve months ended December 31, 2018 was $459.2 million.
- Gross profit for the twelve months ended December 31, 2018 was $90.0 million or 19.6%.
- Adjusted EBITDA1 for the twelve months ended
December 31, 2018 was $16.5 million.
1 EBITDA and Adjusted
EBITDA are non-IFRS financial measures and do not have any
standardized meaning under IFRS. See "Use of Non-IFRS Financial
Measures" below.
|
Fourth Quarter Financial Highlights
- Revenue was $136.1 million for
the three months ended December 31,
2018, compared to revenue of $52.8
million for the same period in 2017, an increase of 158%.
The increase is primarily attributable to five transactions
completed by the Company in 2018.
- Gross profit for the three months ended December 31, 2018 was $30.3 million or 22.3% compared to $10.7 million or 20.2% for the three months ended
December 31, 2017.
- Adjusted EBITDA1 was $5.8 million for the three months ended
December 31, 2018, compared to
Adjusted EBITDA1 loss of $0.3 million for the three months ended
December 31, 2017.
1 EBITDA and Adjusted
EBITDA are non-IFRS financial measures and do not have any
standardized meaning under IFRS. See "Use of Non-IFRS Financial
Measures" below.
|
Key Items from the Fourth Quarter
- Converge entered a service agreement with Essex Technology
Group, Inc. ("Essextec") for the provision of strategic and
operational advice and functions. In addition, the Company loaned
the ultimate parent of Essextec $5.25
million in the form of a demand promissory note at a rate of
10%. The Company's loan was financed by an investment from a
strategic partner in the form of a convertible debenture with an 8%
coupon and conversion price of $1.00.
- Converge announced that it had acquired Lighthouse Computer
Services, a top partner in the IBM ecosystem and one of the 12
companies in Red Hat's Application Partner Program.
- Becker-Carroll, a Converge company, was awarded a contract to
provide facilitation, project management and lead editorial
services in the advancement of the Pan-Canadian Trust
Framework.
Key Items Subsequent to Quarter End
- The Company acquired Software Information Systems, LLC ("SIS")
for USD $11.5 million in cash plus
the issuance of a right for the vendors of SIS to exchange specific
membership units in SIS for an aggregate of 8,000,000 common shares
of Converge over a three-year period.
- Northern Micro, a Converge company, was announced as a
qualified supplier of artificial intelligence solutions to the
Government of Canada.
Fourth Quarter Conference Call
The Company will host a conference call featuring management's
quarterly remarks and follow-up question and answer
period.
A recording of the call will be available and posted on the
Company's website. Dial-in details can be found below.
Conference Call Details:
Date: Friday, March
29th, 2019
Time: 9:00 AM Eastern Time
Participant Dial-in Numbers:
Local – Toronto (+1) 416 764
8609
Toll Free – North America (+1) 888
390 0605
Conference ID: 51999150
Recording Playback Numbers:
Toronto (+1) 416 764 8677
Toll Free – North America (+1) 888
390 0541
Passcode: 999150 #
Expiry Date: Friday, April
12th, 2019 at 11:59pm
Quarterly and Annual Results Materials
The Company's
outlook is contained in its MD&A for the three and twelve
months ended December 31, 2018, which
is available along with the 2018 audited consolidated financial
statements, at www.convergetp.com and at www.sedar.com.
Summary of Consolidated Financial Results
(in thousands of dollars)
|
For the three
months
ended December
31,
|
|
For the twelve
months
ended December
31,
|
|
|
|
|
|
|
|
2018
|
2017
|
|
2018
|
2017
|
Revenues
|
$
|
136,088
|
$
|
52,788
|
|
$
|
459,193
|
$
|
52,788
|
Cost of
sales
|
|
105,765
|
|
42,136
|
|
|
369,224
|
|
42,136
|
Gross
profit
|
|
30,323
|
|
10,652
|
|
|
89,969
|
|
10,652
|
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative expenses
|
|
25,149
|
|
10,842
|
|
|
75,655
|
|
10,859
|
Income (loss)
before the following:
|
|
5,174
|
|
(190)
|
|
|
14,314
|
|
(207)
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
1,850
|
|
783
|
|
|
5,100
|
|
783
|
Finance expense,
net
|
|
2,551
|
|
1,143
|
|
|
7,549
|
|
1,144
|
Change in fair value
of contingent consideration
|
|
(186)
|
|
1,472
|
|
|
7,447
|
|
1,472
|
Transaction costs –
acquisitions, including retention bonuses
|
|
3,063
|
|
315
|
|
|
7,748
|
|
315
|
Initial public
offering costs
|
|
1,622
|
|
-
|
|
|
2,282
|
|
-
|
Other expense
(income)
|
|
(323)
|
|
109
|
|
|
(224)
|
|
109
|
Net loss before
taxes
|
$
|
(3,403)
|
$
|
(4,012)
|
|
$
|
(15,588)
|
$
|
(4,030)
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
(recovery)
|
|
794
|
|
(111)
|
|
|
2,648
|
|
(111)
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
(4,197)
|
|
(3,901)
|
|
|
(18,236)
|
|
(3,919)
|
Exchange loss on
translation of foreign operations
|
|
469
|
|
24
|
|
|
691
|
|
24
|
Comprehensive
loss
|
$
|
(4,666)
|
$
|
(3,925)
|
|
$
|
(18,927)
|
$
|
(3,943)
|
|
|
|
|
|
|
|
|
|
|
EBITDA1
|
$
|
1,583
|
$
|
(2,086)
|
|
$
|
(744)
|
$
|
(2,103)
|
Adjusted
EBITDA1
|
|
5,759
|
|
(299)
|
|
|
16,509
|
|
(316)
|
|
|
|
|
|
|
|
|
|
|
1 EBITDA and
Adjusted EBITDA are non-IFRS financial measures and do not have any
standardized meaning under IFRS. See "Use of Non-IFRS Financial
Measures" below.
|
About Converge
Converge Technology Solutions Corp. combines innovation
accelerators and foundational infrastructure solutions to deliver
best-of-breed solutions and services to customers. The Company is
building a platform of regionally-focused Hybrid IT solution
providers to enhance their ability to provide multi-cloud
solutions, blockchain, resiliency, and managed services, enabling
Converge to address the business and IT issues that public and
private-sector organizations face today.
Notice to Reader: Use of Non-IFRS Financial Measures
and Forward-Looking Statements
- Non-IFRS Financial 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, general and administrative expenses, and corresponds to
income before income tax, depreciation and amortization, finance
expenses, change in fair value of contingent consideration,
transaction costs for acquisitions, initial public offering costs
and other non-operating expenses.
Management believes Adjusted EBITDA is an important indicator as it
excludes certain items that are non-cash expenses, items that
cannot be influenced by management in the short term and items that
do not impact core operating performance, demonstrating the
Company's ability to generate liquidity through operating cash flow
to fund working capital needs, service outstanding debt and fund
future capital expenditures. Adjusted EBITDA is used by some
investors and analysts for the purposes of valuing an issuer.
The intent of Adjusted EBITDA is to provide additional useful
information to investors and analysts and is also used by
management as an internal performance measurement. A reconciliation
of Adjusted EBITDA to net income is contained in the MD&A (see
"Non-IFRS Financial Measures").
- Forward-Looking Information
This press release contains certain "forward-looking
information" and "forward-looking statements" (collectively,
"forward-looking statements") within the meaning of
applicable Canadian securities legislation regarding Converge and
its business. Any statement that involves discussions with respect
to predictions, expectations, beliefs, plans, projections,
objectives, assumptions, future events or performance (often but
not always using phrases such as "expects", or "does not expect",
"is expected" "anticipates" or "does not anticipate", "plans",
"budget", "scheduled", "forecasts". "estimates", "believes" or
intends" or variations of such words and phrases or stating that
certain actions, events or results "may" or "could, "would",
"might" or "will" be taken to occur or be achieved) are not
statements of historical fact and may be forward-looking
statements. Forward-looking statements are necessarily based upon a
number of estimates and assumptions that, while considered
reasonable, are subject to known and unknown risks, uncertainties,
and other factors which may cause the actual results and future
events to differ materially from those expressed or implied by such
forward-looking statements. Except as required by law, Converge
assumes no obligation to update the forward-looking statements of
beliefs, opinions, projections, or other factors, should they
change. The reader is cautioned not to place undue reliance
on forward-looking statements.
For a detailed description of the risks and uncertainties facing
the Company and its business and affairs, readers should refer to
the Company's filing statement dated April
1st, 2019 which is available on SEDAR under the
Company's profile at www.sedar.com in addition to the
consolidated financial statements for theyears ended December 31, and 2017 together with the
corresponding Management's Discussion and Analysis for additional
risk factors described under "Risk Management".
Neither the TSX Venture Exchange nor its regulation services
provider (as that term is defined in the policies of the TSX
Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release.
This press release does not constitute an offer to sell or a
solicitation of an offer to buy any of the securities in
the United States. The securities
have not been and will not be registered under the United States
Securities Act of 1933, as amended (the "U.S. Securities
Act") or any state securities laws and may not be offered or
sold within the United States
unless registered under the U.S. Securities Act and applicable
state securities laws, unless an exemption from such registration
is available.
SOURCE Converge Technology Solutions Corp.