/NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR
DISSEMINATION IN THE UNITED
STATES/
VANCOUVER and TORONTO, Aug. 21,
2019 /CNW/ - Converge Technology Solutions Corp.
("Converge" or "Company") (TSXV:CTS) (FSE:0ZB)
(OTCQX:CTSDF), a software enabled Hybrid IT Solutions Provider, is
pleased to provide its financial results for the three and six
month period ended June 30,
2019. All figures are in CAD dollars unless otherwise
stated.
"We continue to see surging demand for our software solutions
and that is reflected in another strong quarter of financial and
operational performance," said Shaun
Maine, Chief Executive Officer of Converge Technology
Solutions. "The synergies that have arisen from Phase II of our
strategy have already generated significant operational leverage
amongst the companies we have acquired to date, as we are seeing
software and managed services sales increase across the board
compared to a year ago. Hardware sales as a percentage of gross
revenue invoiced continues to decline and is below 50%. The
Company, and its vendor partners through Market Development Funds,
continues to make investments in capabilities to better serve
customers that will add to the growing portion of our software and
services revenue base."
Mr. Maine continued, "As we look towards the second half of
2019, our pipeline of acquisition targets continues to be strong
and we are focused on completing several more acquisitions before
the year is completed. With IBM's acquisition of Red Hat now
complete, Converge is uniquely positioned to roll out Red Hat
enablement across our regions. As our mid-tier customer base,
especially in Finance and Healthcare continue their cloud
transformation journey, Converge is primed to be at the forefront
of this process."
Second Quarter 2019 Financial Highlights
- Revenue for the three months ended June
30, 2019 was $149.3 million
compared to $103.3 million for the
same period in 2018, an increase of 44.5%. Revenue for the six
months ended June 30, 2019 was
$314.0 million compared to
$223.1 million for the same period in
2018, an increase of 40.8%.
- Gross profit for the three months ended June 30, 2019 was $34.2
million or 22.9% compared to $22.3
million or 21.6% for the same period in 2018. Gross profit
for the six months ended June 30,
2019 was $71.4 million or
22.7% compared to $39.4 million or
17.7% for the same period in 2018.
- Adjusted EBITDA1 for the three months ended
June 30, 2019 was $5.5 million compared to $5.3 million for the same period in 2018, an
increase of 3.8%. Adjusted EBITDA1 for the six
month period ended June 30, 2019
totaled $13.96 million compared to
$10.6 million for the same period in
2018, an increase of 31.9%.
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 Second Quarter
- The Company listed its shares on the OTCQB under the symbol
CTSDF to improve market access for US investors.
- Ralph Garcea, formerly a
top-ranked research analyst in Canada was appointed to the Board of Directors
as an independent director.
- Converge announced a $4.3 million
contract with a large U.S.-based financial services company, to
deliver enterprise software solutions.
Key Items Subsequent to Quarter End
- Converge acquired Nordisk Systems Inc., a Northwest-based
partner focused on infrastructure, cloud, security, analytics,
business continuity and managed services solutions.
- The Company appointed industry-leader Greg Berard as President of Converge to help
further solidify the Company's position as a leading provider of
Red Hat and software solutions.
Second 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: Thursday, August
22nd, 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: 82821225
Recording Playback Numbers:
Toronto (+1) 416 764 8677
Toll Free – North America (+1) 888
390 0541
Passcode: 821225 #
Expiry Date: Thursday, August
29th, 2019 11:59pm
Quarterly and Annual Results Materials
The Company's
outlook is contained in its MD&A for the three and six months
ended June 30, 2019, which is
available along with the 2019 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 June
30,
|
|
For the six
months ended June
30,
|
|
2019
|
2018
|
|
2019
|
2018
|
Revenues
|
$
|
149,273
|
$
|
103,277
|
|
$
|
314,035
|
$
|
223,061
|
Cost of
sales
|
|
115,049
|
|
80,948
|
|
|
242,618
|
|
183,647
|
Gross
profit
|
|
34,224
|
|
22,329
|
|
|
71,417
|
|
39,414
|
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative expenses
|
|
29,704
|
|
17,652
|
|
|
59,336
|
|
29,387
|
Income before the
following:
|
|
4,520
|
|
4,677
|
|
|
12,081
|
|
10,027
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
2,575
|
|
1,132
|
|
|
5,183
|
|
1,944
|
Finance expense,
net
|
|
3,221
|
|
2,142
|
|
|
6,602
|
|
3,390
|
Change in fair value
of contingent consideration
|
|
-
|
|
4,430
|
|
|
-
|
|
7,443
|
Transaction costs –
acquisitions, including
retention bonuses
|
|
438
|
|
2,506
|
|
|
3,616
|
|
2,840
|
Other
expense
|
|
244
|
|
81
|
|
|
478
|
|
3
|
Net loss before
taxes
|
$
|
(1,958)
|
$
|
(5,614)
|
|
$
|
(3,798)
|
$
|
(5,593)
|
|
|
|
|
|
|
|
|
|
|
Income tax
expense
|
|
400
|
|
182
|
|
|
1,455
|
|
1,672
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
(2,358)
|
|
(5,796)
|
|
|
(5,253)
|
|
(7,265)
|
|
|
|
|
|
|
|
|
|
|
Exchange gain (loss)
on translation of foreign operations
|
|
(233)
|
|
(95)
|
|
|
200
|
|
(142)
|
Comprehensive
loss
|
$
|
(2,125)
|
$
|
(5,891)
|
|
$
|
(5,053)
|
$
|
(7,407)
|
|
|
|
|
|
|
|
|
|
|
EBITDA1
|
$
|
5,096
|
$
|
(1,605)
|
|
$
|
10,151
|
$
|
654
|
Adjusted
EBITDA1
|
$
|
5,510
|
$
|
5,331
|
|
$
|
13,963
|
$
|
10,603
|
|
|
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 the years 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.