Adjusted EBITDA1 up $3 million on Higher Revenue and Gross
Profit
TORONTO, May 14, 2018 /CNW/ - Pivot Technology
Solutions, Inc. (TSX: PTG), ("Pivot"), a full-service information
technology provider, today reported its financial results for the
three months ended March 31, 2018, a
period of strong revenue growth and improved operating performance.
All figures are in US dollars unless otherwise stated.
First Quarter Summary
- Revenue was $369.3 million, up
14.5% from $322.4 million in Q1
2017
-
- Product revenue higher by 17.2%
- Service revenue lower by 4.3% despite 1.8% growth in Pivot
direct services
- Gross profit was $39.3 million
(10.6% margin), up 15.2% from $34.1
million (10.6% margin) in Q1 2017
- Adjusted EBITDA1 was $1.5
million, up $3.1 million from
a loss of $1.6 million in Q1 2017
reflecting revenue growth and effective cost management
- Loss was $2.3 million
($0.06 per share) compared to loss of
$4.2 million ($0.10 per share) in Q1 2017
1
|
Non-IFRS Measure. See
Non-IFRS Measures section of this news release.
|
Dividends and Normal Course Issuer Bid
At its meeting
today, the Company's Board of Directors declared a regular
quarterly dividend in the prescribed amount of C$0.04 per common share, payable June 15, 2018 to common shareholders of record
May 31, 2018. During the first
quarter, the Company paid $1.3
million in common share dividends or C$0.04 per share. Subsequent to
March 31, 2018, Pivot repurchased
231,000 shares under its Normal Course Issuer Bid at an average
acquisition price of C$1.97 per
share.
Management Commentary
"Adjusted EBITDA1
increased over $3 million over last
year, led by growth in our traditional core product business," said
Kevin Shank, President and Chief
Executive Officer. "We also generated higher rebates and contained
SG&A growth while continuing to invest in Smart Edge™ and
expanding our service capabilities.
"Revenue from Pivot's direct services increased by 1.8%, led by
growth in the Workforce channel. This partially offset the lower
sales of OEM maintenance agreements, which tend to fluctuate from
quarter to quarter. While there is variability based on the timing
of customer orders for services, the trend continues to be
positive."
During the quarter, Pivot continued to advance Smart Edge™, its
potentially disruptive developer platform designed to support
enterprise Multi-Access Edge Computing (MEC) solutions. The Smart
EdgeTM solution has demonstrated its ability to improve
user experience and is expected to enable new revenue streams for
our customers. Along with improving performance, Smart Edge™,
reduces ongoing edge total cost of ownership. All the
aforementioned factors are important in the adoption of 5G
technologies. While the solution still must pass additional
testing hurdles, the initial results are
encouraging. Management expects to commercialize the
technology this year through Smart-Edge.com, Inc., a subsidiary
established for this purpose during the quarter.
"We continue to invest in Smart Edge™ and anticipate generating
revenue towards the end of 2018," said David Toews, Interim Chief Financial Officer.
"SG&A also reflects the cost base added from consolidating a
partially owned business, acquired late last year, along with an
increase in headcount to support growth and expansion of the
services portfolio. While these factors increased SG&A by
$2.1 million, they are targeted to
provide long-term growth."
First Quarter Results Summary
First quarter 2018
revenues were $369.3 million, 14.5%
or $46.8 million above the same
period in 2017 primarily due to higher sales to non-major
customers. Product revenue was $331.5
million, 17.2% or $48.5
million above Q1 2017. First quarter service revenues were
$37.7 million, 4.3% or $1.7 million lower than a year ago due to a
decrease in OEM maintenance revenue. Revenue from the Company's own
service portfolio ("Pivot direct services") grew 1.8% year over
year as the Company continued to implement its services strategy
across its customer base.
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 major
and non-major customers. In the first quarter, major customers
accounted for 31.7% of revenue compared to 38.4% in Q1 a year
ago.
First quarter 2018 cost of sales was $330.0 million, 14.5% or $41.7 million higher than a year ago. Gross
profit was $39.3 million (10.6%
margin), up 15.2% or $5.2 million
from $34.1 million (10.6% margin) in
Q1 a year ago. Gross margin performance reflected the consolidation
of a partially owned business, acquired late last year and lower
service delivery costs, partially offset by decreases in OEM
maintenance revenue.
Selling, general and administrative ("SG&A") expenses were
$37.8 million, 6.0% ($2.1 million) higher than a year ago as a result
of the consolidation of a partially owned entity, increased
headcount primarily in services to support the Company's strategy
to enhance Pivot's services portfolio and capabilities, and higher
commissions related to the increase in gross profit.
Adjusted EBITDA1 (see non-IFRS measures) was
$1.5 million, a 196.6% increase from
a loss of $1.6 million in Q1 2017 as
a result of higher revenue and gross profit and stable gross
margins. Net loss was $2.3 million
with loss per share of $0.06 compared
to net loss of $4.2 million or loss
per share of $0.10 in Q1 2017.
Looking Forward
Pivot's strategy has several
dimensions: i) build on Pivot's core business of selling IT
solutions, both products and services; ii) enhance Pivot's service
portfolio and capabilities, specifically related to services that
Pivot delivers; iii) drive a commercial transformation to improve
sales processes and innovation selling; iv) support customers as
they expand internationally; v) improve cost management; vi)
address legacy issues; and vii) commercialize and monetize the
Smart Edge™ technology.
Among the recent advancements made, Pivot formed a strategy and
business platform to commercialize Smart Edge™ under the leadership
of Kurt Steinhauer, President of
ACS; implemented Smart Edge™ use cases at over 15 additional sites
(where preliminary results included a 40% reduction in WAN
utilization and download speed improvement of 400%), which will
support marketing and sales efforts for this potentially disruptive
technology; expanded inside and outside sales resources; and added
new customers.
"Industry trends continue to support Pivot's comprehensive
strategy to build on its products and expanded services business,"
said Mr. Shank. "Despite normal seasonality, we began 2018 with
strong growth and look forward to capitalizing on our opportunities
this year."
Quarterly Results Materials
The Company's outlook is
contained in its MD&A for the three months ended March 31, 2018, which is available along with the
unaudited interim condensed consolidated financial statements, at
www.pivotts.com and at www.sedar.com.
SELECTED FINANCIAL INFORMATION AND OPERATING RESULTS
|
Three months ended
March 31,
|
|
(unaudited)
|
|
2018
|
2017
|
Revenue
|
369,266
|
322,423
|
|
Cost of
sales
|
329,967
|
288,297
|
Gross
profit
|
39,299
|
34,126
|
|
Employee compensation
and benefits
|
29,595
|
28,204
|
|
Other selling,
general and administrative expenses
|
8,206
|
7,472
|
Income (loss)
before the following:
|
1,498
|
(1,550)
|
|
Depreciation and
amortization
|
2,849
|
2,811
|
|
Finance
expense
|
1,313
|
1,082
|
|
Change in fair value
of liabilities
|
40
|
(107)
|
|
Other (income)
expense, net
|
(99)
|
784
|
Loss before income
taxes
|
(2,605)
|
(6,120)
|
|
Recovery of income
taxes
|
(341)
|
(1,933)
|
Loss for the
period
|
(2,264)
|
(4,187)
|
|
|
|
Income (loss) for the
period attributable to non-controlling interests
|
205
|
(51)
|
Loss for the period
attributable to shareholders
|
(2,469)
|
(4,136)
|
|
|
|
Other
comprehensive income
|
|
|
Items that may be
reclassified subsequently to income
|
|
|
|
for the
period:
|
|
|
|
|
Exchange gain on
translation of foreign operations
|
21
|
3
|
|
21
|
3
|
Total
comprehensive loss
|
(2,243)
|
(4,184)
|
Total
comprehensive loss attributable to shareholders
|
(2,448)
|
(4,133)
|
|
|
|
Loss per common
share:
|
|
|
|
|
|
Loss available to
common shareholders
|
(2,469)
|
(4,136)
|
|
|
|
Basic
|
$
(0.06)
|
$
(0.10)
|
Diluted
|
$
(0.06)
|
$
(0.10)
|
Note:
|
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 measure
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
income tax, depreciation and amortization, finance expense, change
in fair value of liabilities, and other expense.
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 Measures").
First Quarter Conference Call
At 8:30 a.m. eastern on
Tuesday, May 15, 2018, 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.
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 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
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 the commercialization of Smart Edge, long term
growth, the payment of quarterly dividends in 2018, 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 market
acceptance of the Smart EdgeTM solution, Pivot's
continued financial liquidity to invest in its business and pay
quarterly dividends, 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 maintain its liquidity, and the risk that testing
and operational results from the Smart-Edge platform will not meet
expectations. 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.
SOURCE Pivot Technology Solutions, Inc