TORONTO and GATINEAU, QC, Nov. 8,
2022 /PRNewswire/ -- Converge Technology Solutions Corp.
("Converge" or "the Company") (TSX: CTS) (FSE: 0ZB)
(OTCQX: CTSDF) is pleased to provide its financial results for the
three and nine months ended September
30, 2022. All figures are in Canadian dollars unless
otherwise stated.
Financial Summary
In $000s except per
share amounts
|
3-month
Q3
2022
|
3-month
Q3 2021
|
Growth
%
|
9-month
Q3
2022
|
9-month
Q3 2021
|
Growth
%
|
Gross
revenues1
|
730,571
|
472,419
|
55 %
|
2,134,178
|
1,332,639
|
60 %
|
Net revenues
|
603,206
|
367,349
|
64 %
|
1,749,899
|
1,022,858
|
71 %
|
Gross profit
(GP)
|
139,654
|
83,771
|
67 %
|
381,851
|
229,811
|
66 %
|
Gross margin
%
|
23.2 %
|
22.8 %
|
|
21.8 %
|
22.5 %
|
|
Adjusted
EBITDA1
|
30,967
|
18,862
|
64 %
|
99,804
|
59,349
|
68 %
|
Adjusted
EBITDA1 as
a % of GP
|
22.2 %
|
22.5 %
|
|
26.1 %
|
25.8 %
|
|
Adjusted
EBITDA1 as
a % of Net Revenue
|
5.1 %
|
5.1 %
|
|
5.7 %
|
5.8 %
|
|
Net income
|
18,228
|
4,596
|
297 %
|
27,449
|
9,287
|
196 %
|
Net income per diluted
share
|
$0.10
|
$0.02
|
400 %
|
$0.14
|
$0.05
|
180 %
|
Adjusted net
income1
|
21,266
|
13,815
|
54 %
|
73,676
|
39,979
|
84 %
|
Adjusted
EPS1
|
$0.10
|
$0.07
|
43 %
|
$0.34
|
$0.22
|
55 %
|
Financial highlights for the three-month period ended September 30, 2022 ("Q3-2022"):
- Q3-2022 net revenue increased 64% over the same quarter last
year ("Q3-2021") to $603.2
million
- Q3-2022 gross profit increased 67% over last year to
$139.7 million
- Adjusted EBITDA1 increased 64% to $31.0 million from $18.9
million last year
- For Q3-2022, the Company generated Adjusted Free
Cashflow1 and Adjusted Free Cash Flow Conversion1 of
$24.7 million and 80%,
respectively
- Reported Adjusted EPS1 of $0.10 per share for Q3-2022 increasing by 43%
from $0.07 per share in Q3-2021
- Organic gross revenue growth1 for Q3-2022 of 6%.
Organic gross profit growth1 for Q3-2022 of 13%
- Professional (Advisory and Implementation) services revenue in
Q3 grew 85% year over year to $77.4
million.
- Achieved 108 net new logos in Q3-2022, securing 328 net new
logos in 2022
- Improvements to hardware supply chains resulted in product
bookings backlog2 decreasing to approximately
$432.8 million in Q3-2022 compared to
$507.4 million in Q2-2022 while
Q3-2022 Services Backlog2 was approximately $70.2 million compared to $70.9 million in Q2-2022
_________________________________
|
1 This
is a Non-IFRS measure (including non-IFRS ratio) and not a
recognized, defined or a standardized measure under IFRS. See the
Non-IFRS Financial Measures section of this news release for
definitions, uses and a reconciliation of historical non-IFRS
financial measures to the most directly comparable IFRS financial
measures.
2 Bookings backlog is calculated as purchase orders
received from customers not yet delivered at the end of the fiscal
period.
|
Q3-2022 Business Highlights & Subsequent to Quarter
- Converge celebrated the five-year anniversary of its first
acquisition and secured the CRN 2022 Triple Crown award with top
rankings on all three CRN lists, including the Solution Provider
500, Fast Growth 150 and Tech Elite 250.
- Acquired approximately $1.2
billion of LTM gross revenue and $68.4 million EBITDA through 10 acquisitions
year-to-date including Paragon Development Systems, Inc. ("PDS");
Visucom GmbH ("Visucom"); 1CRM Systems Corp. ("1CRM"); Creative
Breakthroughs, Inc. ("CBI"); Interdynamix Systems ("IDX");
Solutions Notarius Inc. ("Notarius"); Gesellschaft für digitale
Bildung, Institur für modern Bildung, and DEQSTER (collectively
"GfdB"); and Technology Integration Group ("TIG"), Newcomp
Analytics ("Newcomp") and Stone Technologies Group Limited
("Stone").
- Completed a five year $500m
global revolving credit facility (the "Global Credit Facility"),
led by J.P. Morgan and Canadian Imperial Bank of Commerce as joint
lead arrangers, with the Bank of Nova
Scotia, the Toronto
-Dominion Bank and Bank of Montreal participating in the lender group.
The Global Credit Facility includes an uncommitted accordion of
$100m, for a total borrowing capacity
of $600m.
- Normal Course Issuer Bid (NCIB) commenced on August 11, 2022 allowing the Company to purchase
for cancellation up to an aggregate of 10,744,818 common
shares.
- Richard Lecoutre joined the Converge Leadership team as Global
Chief Financial Officer on September 1,
2022 and will help guide Converge's European and global
expansion.
"We continue to report record financial results, and I am
incredibly proud that Converge grew by over 60% year-over-year
across revenue, gross profit and Adjusted EBITDA," said
Shaun Maine, CEO of Converge. "The
fact that after 3 quarters Converge has higher revenue, gross
profit and Adjusted EBITDA compared to our full year 2021 results
illustrates how Converge's combination of organic and inorganic
growth is the best growth model in the IT Services industry.
Combined with that, our 85% year over year growth in professional
services is at a higher rate than the overall business proving our
shift to become strategically more valuable to our customer. This
means that we now have an approximately $500m annualized services business. The expansion
of our advisory business, particularly around analytics and
cybersecurity, has resulted in record gross profit and accelerated
services growth. Having completed our 10th transaction in
2022 we exceeded our goal of adding $1b gross revenue through acquisitions this year.
Now we will focus on integration and our cross-selling strategies,
particularly around services and high value solutions. We expect to
see the high demand for our services-led, software-enabled hybrid
IT solutions continue for the remainder of 2022, with Q4 growth
rates consistent with Q3 year-to-date, and this high demand
continuing into 2023."
Conference Call Details:
Date: Wednesday, November 9th, 2022
Time: 8:00 AM Eastern Time
Participant Webcast Link:
Webcast Link - https://app.webinar.net/kOdERzOlj7K
Participant Dial-in Details:
Confirmation #: 18195364
Toronto: 416-764-8609
North American Toll Free: 888-390-0605
International Toll-Free Numbers:
Germany: 08007240293
Ireland: 1800939111
Spain: 900834776
Switzerland: 0800312635
United Kingdom: 08006522435
Recording Playback:
A recording of the webcast will be available after the call using
the following link:
Webcast Link - https://app.webinar.net/kOdERzOlj7K
Expiry Date: November 9th,
2023
A live audio webcast accompanied by presentation slides and
archive of the conference call will be available by visiting the
Company's website
at https://convergetp.com/investor-relations/. Please connect
at least 15 minutes prior to the conference call to ensure time for
any software download that may be needed to hear the webcast.
About Converge
Converge Technology Solutions Corp. is
a software-enabled IT & Cloud Solutions provider focused on
delivering industry-leading solutions and services. Converge's
global solution approach delivers advanced analytics, application
modernization, cloud, cybersecurity, digital infrastructure, and
digital workplace offerings to clients across various industries.
The Company supports these solutions with advisory, implementation,
and managed services expertise across all major IT vendors in the
marketplace. This multi-faceted approach enables Converge to
address the unique business and technology requirements for all
clients in the public and private sectors. For more information,
visit convergetp.com.
Summary of Consolidated Statements of Financial
Position
(expressed in thousands of Canadian
dollars)
|
September 30,
2022
|
December 31,
2021
|
Assets
|
|
|
Current
assets
|
|
|
|
Cash
|
$
172,229
|
$
248,193
|
|
Restricted
cash
|
4,348
|
-
|
|
Trade and other
receivables
|
637,764
|
416,499
|
|
Inventories
|
163,777
|
104,254
|
|
Prepaid expenses
and other assets
|
21,502
|
11,762
|
|
|
999,620
|
780,708
|
Long-term
assets
|
|
|
|
Property, equipment,
and right-of-use assets, net
|
64,708
|
30,642
|
|
Intangible assets,
net
|
454,117
|
233,586
|
|
Goodwill
|
502,575
|
323,284
|
|
Other non-current
assets
|
663
|
617
|
|
|
$
2,021,683
|
$ 1,368,837
|
|
|
|
|
Liabilities and
shareholders' equity
|
|
|
Current
liabilities
|
|
|
|
Trade and other
payables
|
$
686,629
|
$
519,434
|
|
Borrowings
|
371,690
|
816
|
|
Other financial
liabilities
|
43,073
|
29,407
|
|
Deferred
revenue
|
69,371
|
27,581
|
|
Income taxes
payable
|
14,153
|
13,977
|
|
|
1,184,916
|
591,215
|
Long-term
liabilities
|
|
|
|
Other financial
liabilities
|
106,413
|
85,296
|
|
Borrowings
|
-
|
412
|
|
Deferred tax
liability
|
90,685
|
43,086
|
|
|
$
1,382,014
|
$
720,009
|
|
|
|
|
Shareholders'
equity
|
|
|
|
Common
shares
|
609,916
|
633,489
|
|
Contributed
surplus
|
6,497
|
2,325
|
|
Exchange
rights
|
1,641
|
2,396
|
|
Accumulated other
comprehensive (loss) income
|
(530)
|
329
|
|
Deficit
|
(9,874)
|
(25,050)
|
Total equity
attributable to shareholders of Converge
|
607,650
|
613,489
|
Non-controlling
interest
|
32,019
|
35,339
|
|
|
639,669
|
648,828
|
|
|
$
2,021,683
|
$
1,368,837
|
Summary of Consolidated Statements of Income and Comprehensive
Income
(expressed in thousands of Canadian
dollars)
|
|
For the three
months ended
September 30,
|
|
For the
nine months ended
September 30,
|
|
|
2022
|
|
2021
|
|
2022
|
|
2021
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
Product
|
$
|
474,006
|
$
|
289,591
|
$
|
1,419,216
|
$
|
823,385
|
Service
|
|
129,200
|
|
77,758
|
|
330,683
|
|
199,473
|
Total
revenue
|
|
603,206
|
|
367,349
|
|
1,749,899
|
|
1,022,858
|
Cost of
sales
|
|
463,552
|
|
283,578
|
|
1,368,048
|
|
793,047
|
Gross
profit
|
|
139,654
|
|
83,771
|
|
381,851
|
|
229,811
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative expenses
|
|
111,032
|
|
66,092
|
|
287,267
|
|
173,365
|
Income before the
following
|
|
28,622
|
|
17,679
|
|
94,584
|
|
56,446
|
Depreciation and
amortization
|
|
23,094
|
|
10,162
|
|
54,751
|
|
24,548
|
Finance expense,
net
|
|
5,886
|
|
1,528
|
|
10,798
|
|
5,675
|
Special
charges
|
|
8,211
|
|
8,702
|
|
19,492
|
|
17,101
|
Share-based
compensation expense
|
|
1,275
|
|
1,193
|
|
4,172
|
|
1,193
|
Other income
|
|
(25,570)
|
|
(8,491)
|
|
(22,432)
|
|
(5,485)
|
Income before income
taxes
|
|
15,726
|
|
4,585
|
|
27,803
|
|
13,408
|
|
|
|
|
|
|
|
|
|
Income tax
expense (recovery)
|
|
(2,502)
|
|
(11)
|
|
304
|
|
4,121
|
|
|
|
|
|
|
|
|
|
Net
income
|
$
|
18,228
|
$
|
4,596
|
$
|
27,499
|
$
|
9,287
|
Net income (loss)
attributable to:
|
|
|
|
|
|
|
|
|
Shareholders of
Converge
|
|
20,595
|
|
4,596
|
|
30,819
|
|
9,287
|
Non-controlling
interest
|
|
(2,367)
|
|
-
|
|
(3,320)
|
|
-
|
|
$
|
18,228
|
$
|
4,596
|
$
|
27,499
|
$
|
9,287
|
Other comprehensive
income
|
|
|
|
|
|
|
|
|
Exchange differences
on translation of foreign operations
|
|
5,352
|
|
(641)
|
|
(859)
|
|
(23)
|
Comprehensive
income
|
$
|
23,580
|
$
|
3,955
|
$
|
26,640
|
$
|
9,264
|
Comprehensive income
(loss) attributable to:
|
|
|
|
|
|
|
|
|
Shareholders of
Converge
|
|
25,947
|
|
3,955
|
|
29,660
|
|
9,264
|
Non-controlling
interest
|
|
(2,367)
|
|
-
|
|
(3,320)
|
|
-
|
|
$
|
23,580
|
|
3,955
|
|
26,640
|
|
9,264
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA[2]
|
$
|
30,967
|
$
|
18,862
|
$
|
99,804
|
$
|
59,349
|
Adjusted EBITDA as a
% of Net Revenue2
|
|
5.1 %
|
|
5.1 %
|
|
5.7 %
|
|
5.8 %
|
Adjusted EBITDA as a
% of Gross Profit2
|
|
22.2 %
|
|
22.5 %
|
|
26.1 %
|
|
25.8 %
|
|
_______________________________
|
2 This
is a Non-IFRS measure (including non-IFRS ratio) and not a
recognized, defined or a standardized measure under IFRS. See the
Non-IFRS Financial Measures section of this news release for
definitions, uses and a reconciliation of historical non-IFRS
financial measures to the most directly comparable IFRS financial
measures.
|
Summary of Consolidated Statements of Cash
Flows
(expressed in thousands of Canadian
dollars)
|
|
For the three
months
ended September 30,
|
For the nine
months
ended September 30,
|
|
|
2022
|
|
2021
|
|
2022
|
|
2021
|
|
|
|
|
|
|
|
|
|
Cash flows from
operating activities
|
|
|
|
|
|
|
|
|
Net income
|
$
|
18,228
|
$
|
4,596
|
$
|
27,499
|
$
|
9,287
|
Adjustments to
reconcile net income to net cash from operating
activities
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
24,101
|
|
10,324
|
|
58,071
|
|
26,635
|
Unrealized foreign
exchange gains
|
|
(24,233)
|
|
(7,991)
|
|
(20,532)
|
|
(5,025)
|
Share-based
compensation expense
|
|
1,275
|
|
1,193
|
|
4,172
|
|
1,193
|
Finance
expense, net
|
|
5,886
|
|
1,528
|
|
10,798
|
|
5,675
|
Change in
fair value of contingent consideration
|
|
-
|
|
3,808
|
|
-
|
|
4,405
|
Income tax
expense (recovery)
|
|
(2,502)
|
|
(11)
|
|
304
|
|
4,121
|
|
|
22,755
|
|
13,447
|
|
80,312
|
|
46,291
|
Changes in non-cash
working capital items
|
|
|
|
|
|
|
|
|
Trade and other
receivables
|
|
71,898
|
|
34,045
|
|
(4,241)
|
|
93,065
|
Inventories
|
|
6,511
|
|
(7,103)
|
|
17,769
|
|
(31,290)
|
Prepaid expenses and
other assets
|
|
835
|
|
(4,146)
|
|
(3,781)
|
|
(4,447)
|
Trade and other
payables
|
|
(86,206)
|
|
16,896
|
|
(69,836)
|
|
(48,706)
|
Income taxes
payable
|
|
(1,901)
|
|
(634)
|
|
(18,926)
|
|
(2,613)
|
Other financial
liabilities
|
|
(338)
|
|
6
|
|
1,898
|
|
1,877
|
Deferred revenue and
customer deposits
|
|
1,396
|
|
(4,390)
|
|
7,996
|
|
13,123
|
Cash from operating
activities
|
|
14,950
|
|
48,121
|
|
11,191
|
|
67,300
|
|
|
|
|
|
|
|
|
|
Cash flows used in
investing activities
|
|
|
|
|
|
|
|
|
Purchase of property
and equipment
|
|
(4,332)
|
|
(810)
|
|
(18,812)
|
|
(3,661)
|
Proceeds on disposal of
property and equipment
|
|
-
|
|
421
|
|
(6)
|
|
552
|
Repayment of contingent
consideration
|
|
-
|
|
-
|
|
(10,135)
|
|
(5,502)
|
Repayment of deferred
consideration
|
|
(121)
|
|
(1,879)
|
|
(7,069)
|
|
(5,627)
|
Business combinations,
net of cash acquired
|
|
(154,212)
|
|
(148,143)
|
|
(353,683)
|
|
(244,293)
|
Cash used in
investing activities
|
|
(158,665)
|
|
(150,411)
|
|
(389,705)
|
|
(258,531)
|
|
|
|
|
|
|
|
|
|
Cash flows from
financing activities
|
|
|
|
|
|
|
|
|
Transfers from (to)
restricted cash
|
|
141
|
|
(11,467)
|
|
(4,372)
|
|
(11,467)
|
Interest
paid
|
|
(1,229)
|
|
(561)
|
|
(4,287)
|
|
(5,639)
|
Dividend
paid
|
|
-
|
|
-
|
|
(1,080)
|
|
-
|
Payments of lease
liabilities
|
|
(3,462)
|
|
(2,584)
|
|
(8,494)
|
|
(7,001)
|
Net proceeds from
issuance of common shares
|
|
-
|
|
248,370
|
|
-
|
|
493,886
|
Repurchase of common
shares
|
|
(30,539)
|
|
-
|
|
(30,539)
|
|
-
|
Repayment of notes
payable
|
|
(37)
|
|
(376)
|
|
(196)
|
|
(3,790)
|
Net proceeds from
(repayment of) borrowings
|
|
173,084
|
|
(51,900)
|
|
357,901
|
|
(135,448)
|
Cash from financing
activities
|
|
137,958
|
|
181,482
|
|
308,933
|
|
330,541
|
|
|
|
|
|
|
|
|
|
Net change in cash
during the period
|
|
(5,757)
|
|
79,192
|
|
(69,581)
|
|
139,310
|
Effect of foreign
exchange on cash
|
|
(6,189)
|
|
6,229
|
|
(6,383)
|
|
6,267
|
Cash, beginning of
period
|
|
184,175
|
|
124,923
|
|
248,193
|
|
64,767
|
Cash, end of
period
|
$
|
172,229
|
$
|
210,344
|
$
|
172,229
|
$
|
210,344
|
Non-IFRS Financial Measures
This news release refers to certain performance indicators
including "Adjusted earnings before interest, taxes, depreciation
and amortization (Adjusted EBITDA)", "Adjusted Free Cash Flow",
"Adjusted Free Cash Flow Conversion", "Adjusted Net Income" and
"Adjusted Earnings per Share", "Gross Revenue", and "Organic
Growth" which are not recognized under IFRS and do not have any
standardized meaning prescribed by IFRS. Converge's method of
calculating such non-IFRS measures and ratios may differ from
methods used by other companies and therefore may not be comparable
to similar measures presented by other companies. Management
believes that these measures are useful to most shareholders,
creditors, and other stakeholders in analyzing the Company's
operating results, and can highlight trends in its core business
that may not otherwise be apparent when relying solely on IFRS
financial measures. The Company also believes that securities
analysts, investors and other interested parties frequently use
non-IFRS measures in the evaluation of issuers.
Management also uses non-IFRS measures and ratios in order to
facilitate operating performance comparisons from period to period,
prepare annual operating budgets and assess the ability to meet
capital expenditure and working capital requirements. These
non-IFRS financial measures and ratios are furnished to provide
additional information and should not be considered in isolation or
as an alternative to the consolidated income (loss) or any other
measure of performance under IFRS. Investors are encouraged to
review the Company's financial statements and disclosures in their
entirety and are cautioned not to put undue reliance on non-IFRS
measures and ratios and view them in conjunction with the most
comparable IFRS financial measures.
Adjusted EBITDA
Adjusted EBITDA represents net income (loss) adjusted to exclude
amortization, depreciation, interest expense and finance costs,
foreign exchange gains and losses, share-based compensation
expense, income tax expense, and special charges. Special charges
consist primarily of restructuring related expenses for employee
terminations, lease terminations, and restructuring of acquired
companies, as well as certain legal fees or provisions related to
acquired companies. From time to time, it may also include
adjustments in the fair value of contingent consideration, and
other such non-recurring costs related to restructuring, financing,
and acquisitions.
Adjusted EBITDA is not a recognized, defined, or standardized
measure under IFRS. The Company's definition of Adjusted EBITDA
will likely differ from that used by other companies and therefore
comparability may be limited. Adjusted EBITDA should not be
considered a substitute for or in isolation from measures prepared
in accordance with IFRS.
The Company has reconciled Adjusted EBITDA to the most
comparable IFRS financial measure as follows:
|
For the three
months
ended September
30,
|
For the nine
months
ended September
30,
|
|
2022
|
2021
|
2022
|
2021
|
|
Net income before
taxes
|
$
15,726
|
$
4,585
|
$ 27,803
|
$
13,408
|
|
Finance
expense
|
5,886
|
1,528
|
10,798
|
5,675
|
|
Share-based
compensation expense
|
1,275
|
1,193
|
4,172
|
1,193
|
|
Depreciation and
amortization
|
23,094
|
10,162
|
54,751
|
24,548
|
|
Depreciation included
in cost of sales
|
1,008
|
683
|
3,320
|
2,443
|
|
Foreign exchange
gain
|
(24,233)
|
(7,991)
|
(20,532)
|
(5,025)
|
|
Special
charges
|
8,211
|
8,702
|
19,492
|
17,107
|
|
Adjusted
EBITDA
|
$
30,967
|
$
18,862
|
$
99,804
|
$
59,349
|
|
Adjusted Free Cash Flow and Adjusted Free Cash Flow
Conversion
The Company calculates Adjusted Free Cash Flow as Adjusted
EBITDA less: (i) recurring capital expenditures ("Recurring Capex")
and (ii) lease payments relating to the IFRS 16 lease liability
("IFRS 16 Lease Liability"). Management defines Recurring Capex as
the actual capital expenditures which are required to maintain the
Company's existing and ongoing operations in its normal course of
business. Recurring Capex excludes one-time expenditures to support
growth initiatives that the Company categorizes as non-recurring in
nature. Adjusted Free Cash Flow is a useful measure that allows the
Company to primarily identify how much pre-tax cash is available
for continued investment in the business and for the Company's
growth by acquisition strategy.
Management also believes that Adjusted EBITDA is a good proxy
for cash generation and as such, Adjusted Free Cash Flow Conversion
is a useful metric that demonstrates that the rate at which the
Company can convert Adjusted EBITDA to cash.
The following table provides a calculation for Adjusted Cash
Flow and Adjusted Cash Flow Conversion:
|
For the three
months
ended September
30,
|
For the nine
months
ended September
30,
|
|
2022
|
2021
|
2022
|
2021
|
|
Adjusted
EBITDA
|
$
30,967
|
$
18,862
|
$
99,804
|
$
59,349
|
|
|
|
|
|
|
|
Capex
|
(2,765)
|
(810)
|
(8,622)
|
(3,661)
|
|
Payment of lease
liabilities
|
(3,462)
|
(2,584)
|
(8,494)
|
(7,001)
|
|
Adjusted Free Cash
Flow
|
$
24,740
|
$
15,468
|
$
82,688
|
$
48,687
|
|
Adjusted Free Cash
Flow Conversion
|
80 %
|
82 %
|
83 %
|
82 %
|
|
Adjusted EBITDA as a % of Net Revenue
The Company believes that Adjusted EBITDA as a % of Net Revenue
is a useful measure of the Company's operating efficiency and
profitability. This is calculated by dividing Adjusted EBITDA by
net revenue.
Adjusted EBITDA as a % of Gross Profit
The Company believes that Adjusted EBITDA as a % of Gross Profit
is a useful measure of the Company's operating efficiency and
profitability. This is calculated by dividing Adjusted EBITDA by
gross profit.
Adjusted Net Income and Adjusted Earnings per Share
("EPS")
Adjusted Net Income represents net income adjusted to exclude
special charges, amortization of acquired intangible assets, and
share-based compensation. The Company believes that Adjusted Net
Income is a more useful measure than net income as it excludes the
impact of one-time, non-cash and/or non-recurring items that are
not reflective of Converge's underlying business performance.
Adjusted EPS is calculated by dividing Adjusted Net Income by the
total weighted average shares outstanding on a basic and diluted
basis.
The Company has provided a reconciliation to the most comparable
IFRS financial measure as follows:
|
For the three
months
|
For the nine
months
|
ended September
30,
|
ended September
30,
|
|
2022
|
2021
|
2022
|
2021
|
Net income
|
$
18,228
|
$
4,596
|
$
27,498
|
$ 9,287
|
Special
charges
|
8,211
|
8,702
|
19,492
|
17,107
|
Amortization of
acquired intangible assets
|
17,785
|
7,315
|
43,047
|
17,417
|
Foreign exchange
gain
|
(24,233)
|
(7,991)
|
(20,533)
|
(5,025)
|
Share-based
compensation
|
1,275
|
1,193
|
4,172
|
1,193
|
Adjusted Net
Income:
|
$
21,266
|
$
13,815
|
$
73,676
|
$
39,979
|
Basic
|
0.10
|
0.07
|
0.34
|
0.22
|
Diluted
|
0.10
|
0.07
|
0.34
|
0.22
|
Gross revenue
Gross revenue, which is a non-IFRS measurement, reflects the
gross amount billed to customers, adjusted for amounts deferred or
accrued. The Company believes gross revenue is a useful alternative
financial metric to net revenue, the IFRS measure, as it better
reflects volume fluctuations as compared to net revenue. Under the
applicable IFRS 15 'principal vs agent' guidance, the principal
records revenue on a gross basis and the agent records commission
on a net basis. In transactions where Converge is acting as an
agent between the customer and the vendor, net revenue is
calculated by reducing gross revenue by the cost of sale
amount.
The Company has provided a reconciliation of gross revenue to
net revenue, which is the most comparable IFRS financial measure,
as follows:
|
For the three
months
|
For the nine
months
|
ended September
30,
|
ended September
30,
|
|
2022
|
2021
|
2022
|
2021
|
Product
|
$
474,006
|
$ 289,591
|
$
1,419,216
|
$ 823,385
|
Managed
services
|
35,681
|
25,785
|
101,932
|
64,205
|
Third party and
professional services
|
220,884
|
157,043
|
613,030
|
445,049
|
Total
|
$
730,571
|
$ 472,419
|
$
2,134,178
|
$ 1,332,639
|
Adjustment for sales
transacted as agent
|
127,365
|
105,070
|
384,279
|
309,781
|
Net
revenue
|
$
603,206
|
$
367,349
|
$
1,749,899
|
$ 1,022,858
|
Organic Growth
The Company measures organic growth on a quarterly and
year-to-date basis, at the gross revenue and gross profit levels,
and includes the contributions under Converge ownership in the
current and comparative period(s). In calculating organic growth,
the Company therefore deducts gross revenue and gross profit
generated from companies that were acquired in the current
reporting period(s).
Gross revenue organic growth is calculated by deducting prior
period gross revenues, as reported in the Company's public filings,
from current period gross revenue for the same portfolio of
companies. Gross revenue organic growth percentage is calculated by
dividing organic growth by prior period reported gross
revenues.
The following table calculates gross revenue organic growth for
Q3-2022:
|
Q3
(3-month)
|
Q3
YTD
(9-month)
|
Gross
revenue
|
$
730,571
|
$
2,134,178
|
Less: gross revenues
from Companies not owned in comparative period
|
230,348
|
634,781
|
Gross revenue of
Companies owned in comparative period
|
500,223
|
1,499,397
|
Prior period gross
revenue
|
472,419
|
1,332,639
|
Organic Growth -
$
|
$
27,804
|
$
166,758
|
Organic Growth -
%
|
5.9 %
|
12.5 %
|
Gross profit organic growth is calculated by deducting prior period
gross profit, as reported in the Companies public filings, from
current period gross profit for the same portfolio of companies.
Gross profit organic growth percentage is calculated by dividing
organic growth by prior period reported gross profit.
The following table calculates gross profit organic growth for
Q3-2022:
|
Q3
(3-month)
|
Q3
YTD
(9-month)
|
Gross profit
|
$
139,654
|
$
381,851
|
Less: gross profit from
companies not owned in comparative period
|
44,994
|
117,539
|
Gross profit of
companies owned in comparative period
|
94,660
|
264,312
|
Prior period gross
profit
|
83,771
|
229,811
|
Organic Growth -
$
|
$
10,889
|
$
34,501
|
Organic Growth -
%
|
13.0 %
|
15.0 %
|
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 the Company
considers 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 filings available on SEDAR under the Company's
profile at www.sedar.com including its most recent Annual
Information Form, its Management Discussion and Analysis and its
Annual and Quarterly Financial Statements.
Converge Technology Solutions Corp., Email:
investors@convergetp.com, Phone: 416-360-1495
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