/NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR
DISSEMINATION IN THE UNITED
STATES/
VANCOUVER and TORONTO, Nov. 20,
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 nine
month period ended September 30,
2019. All figures are in CAD dollars unless otherwise
stated.
"As small and medium sized enterprises continue their journey
towards cloud integration, Converge continues to benefit strongly
by guiding these organizations through the transition process,"
said Shaun Maine, Chief Executive
Officer of Converge Technology Solutions. "With 12.5% of our
annualized gross revenue driven from monthly recurring cloud,
managed services and annualized software revenue, our cloud
strategy has become increasingly effective and the Converge family
of companies continues to cross-sell opportunities to each others'
customers and generate new business between themselves. On a
quarterly basis, we are seeing gross margins further reflect this
growth in the high-margin segment of our cloud business and we are
very pleased to report gross margins in excess of 24% in Q3, a
significant shift from traditional Value Added Resellers. The
Artificial Intelligence, Analytics, Cybersecurity, and RedHat
Ansible roadshows that our President Greg
Berard implemented around our Converge practice areas have
driven hundreds of opportunities across the company and bodes well
as we look forward to Q4 and into 2020."
Mr. Maine continued, "We are pleased to announce that we are
near completion of our Phase II strategy and we intend to initiate
our Phase III strategy beginning in 2020 which is primarily focused
on generating additional operating leverage and efficiencies,
working towards further increasing our Adjusted EBITDA margin."
Third Quarter 2019 Financial Highlights
- Revenue for the three months ended September 30, 2019 was $144.5 million compared to $100.0 million for the same period in 2018, an
increase of 44.4%. Revenue for the nine months ended September 30, 2019 was $473.1 million compared to $323.1 million for the same period in 2018, an
increase of 46.4%.
- Gross profit for the three months ended September 30, 2019 was $34.9 million or 24.1% compared to $20.2 million or 20.2% for the same period in
2018. Gross profit for the nine months ended September 30, 2019 was $108.2 million or 22.9% compared to $59.7 million or 18.5% for the same period in
2018.
- Adjusted EBITDA1 for the three months ended
September 30, 2019 was $5.8 million compared to an Adjusted EBITDA loss
of $0.2 million for the same period
in 2018. Adjusted EBITDA1 for the nine month
period ended September 30, 2019
totaled $19.8 million compared to
$10.7 million for the same period in
2018, an increase of 84.1%.
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 Third Quarter
- 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.
- Converge's family of companies named as Red Hat premier
partners, and selected by Red Hat Inc. to join its Apex partner
program, allowing the Company to leverage new and innovative
technologies that enable clients to achieve business goals that
require the implementation of cloud solutions.
Key Items Subsequent to Quarter End
- Converge acquired Datatrend Technologies Inc., a leading
technology solutions provider located in the Minneapolis/St. Paul region, focused on Next
Gen Data Center, Hybrid Cloud, Infrastructure, Multi-Site IT
Deployments, and ISV/OEM solutions.
- Converge acquired Essex Technology Group, Inc.
("Essextec"), a leading Wall Street-based cloud, cognitive,
and cybersecurity solution provider in the Northeast US. This
acquisition transitioned Essextec from being a key strategic
partner in the Converge family of companies to being a fully owned
subsidiary of Converge.
- Converge acquired VSS Holdings, LLC a Northeast based partner
specializing in managed services, technology solutions, IT
portfolio management and consulting services. This marked the
eleventh acquisition completed by Converge since October 2017.
Third 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, November
21st, 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: 59985193
Recording Playback Numbers:
Toronto (+1) 416 764 8677
Toll Free – North America (+1) 888
390 0541
Passcode: 985193 #
Expiry Date: Thursday, November 28,
2019 at 11:59pm
Quarterly and Annual Results Materials
The Company's
outlook is contained in its MD&A for the three and nine months
ended September, 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 September
30,
|
For the nine
months ended September
30,
|
|
2019
|
2018
|
2019
|
2018
|
Revenues
|
$
|
144,504
|
$
|
100,044
|
$
|
473,091
|
$
|
323,105
|
Cost of
sales
|
|
109,615
|
|
79,812
|
|
364,861
|
|
263,458
|
Gross
profit
|
|
34,889
|
|
20,232
|
|
108,230
|
|
59,647
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative expenses
|
|
31,342
|
|
21,119
|
|
92,777
|
|
50,506
|
Income before the
following:
|
|
3,547
|
|
(887)
|
|
15,453
|
|
9,141
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
3,225
|
|
1,306
|
|
8,409
|
|
3,250
|
Finance expense,
net
|
|
3,880
|
|
1,608
|
|
10,527
|
|
4,998
|
Change in fair value
of contingent consideration
|
|
2,140
|
|
190
|
|
2,140
|
|
7,633
|
Transaction costs –
acquisitions, including retention
bonuses
|
|
843
|
|
2,157
|
|
4,327
|
|
4,685
|
Initial public
offering costs
|
|
-
|
|
385
|
|
-
|
|
660
|
Other
expense
|
|
466
|
|
61
|
|
919
|
|
99
|
Net loss before
taxes
|
$
|
(7,007)
|
$
|
(6,594)
|
$
|
(10,889)
|
$
|
(12,185)
|
|
|
|
|
|
|
|
|
|
Income tax
expense
|
|
70
|
|
182
|
|
1,544
|
|
1,854
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
(7,077)
|
|
(6,776)
|
|
(12,433)
|
|
(14,039)
|
Exchange loss (gain)
on translation of foreign operations
|
|
155
|
|
80
|
|
(43)
|
|
222
|
Comprehensive
loss
|
$
|
(7,232)
|
$
|
(6,856)
|
$
|
(12,390)
|
$
|
(14,261)
|
|
|
|
|
|
|
|
|
|
EBITDA1
|
$
|
1,446
|
$
|
(2,982)
|
$
|
11,535
|
$
|
(2,328)
|
Adjusted
EBITDA1
|
$
|
5,827
|
$
|
(189)
|
$
|
19,790
|
$
|
10,749
|
|
|
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.