New Order Bookings Exceed $1
Billion in Q4-2022
TORONTO and GATINEAU, QC, Feb. 14,
2023 /PRNewswire/ -- Converge Technology Solutions Corp.
(TSX:CTS) today announced certain preliminary, unaudited financial
performance indicators for the full fiscal year and three-month
periods ended December 31, 2022
("Q4-2022").
Fiscal Year 2022 Preliminary Results
- Net Revenue in Fiscal 2022 of approximately $2.5 billion compared to $1.5 billion in FY21, representing growth of
67%1
- Gross Profit for the full year of $548.1
million to $553.1 million
compared to $345.7 million in FY21;
an increase of 59%1
- Adjusted EBITDA2 of $140.6
million to $144.0 million
compared to $94.0 million in FY21; an
increase of 51%1
- Cash on hand was $159.8 million
at the end of 2022, and borrowings under the Company's global
revolving credit facility (the "Global Credit Facility") was
approximately $420.0 million
- Bookings backlog3 increased to approximately
$555.7 million at the end of Q4-2022,
comprised of $479.4 million in
product related backlog and $76.3
million in services related backlog. This represents growth
of over $52 million compared to total
bookings backlog in Q3 2022 and is indicative of the impact of
ongoing supply chain challenges.
"Our team delivered exceptional performance throughout all of
fiscal 2022," said Shaun Maine,
Chief Executive Officer. "We continued to see strong demand across
every industry sector of the mid-market, with more and more
customers trusting Converge as their preferred technology
partner, specifically for their analytics, cloud, and cyber
needs."
________________________________
|
1 Percentage
change is estimated at the midpoint of the stated range, where
applicable.
|
2 Adjusted
EBITDA is a non-IFRS measure and not a recognized, defined or a
standardized measure under IFRS. This non-IFRS financial measure
reported by the Company is defined in the "Non-IFRS Financial
Measures" section of this news release.
|
3 Bookings
backlog is calculated as purchase orders received from customers
not yet delivered at the end of the fiscal period
|
Q4-2022 Preliminary Results
- Net Revenue of $765.3 million to
$777.6 million for the three-month
period, compared to $505.0 million in
Q4-2021, representing growth of approximately 53%1
year-over-year. Revenue was impacted primarily by ongoing supply
chain challenges as evidenced by the higher backlog at year-end. In
addition, and consistent with commentary across the technology
sector, the Company's three largest year-end deals were delayed,
pushing into the first half of 2023. Combined, these factors
represent expected future revenue of more than $90 million.
- Gross Profit in Q4-2022 of between $166.2 million and $171.2
million, increasing 46%1 from Q4-2021. As stated
above, the impact on net revenue also impacted gross profit by more
than $18 million.
- Adjusted EBITDA of $40.8 million
to $44.2 million, increasing from
$34.7 million in Q4-2021 by
23%1. Due to the factors affecting net revenue, adjusted
EBITDA was also impacted by more than $10
million. In addition, the Company executed on delayed
SG&A reductions in North
America in Q4-22 and early 2023, which the Company expects
will drive annualized cost savings of over $15 million.
- Cash generated from operations was approximately $28.0 million, compared to $17.9 million in Q4-2021, representing an
increase of 56%.
- Q4-2022 bookings4 were over $1 billion, setting up a strong 2023 with 89% of
our customers contracted to buy more than one service and/or
solution.
"Despite macro and short-term supply chain headwinds, we have
started 2023 strong from both an order and delivery standpoint,"
added Maine. "At the same time, we invested approximately
$8 million in 2022 to build out a
dedicated team to accelerate the integrations of the 19
acquisitions we've made over the last two years. With no new
acquisitions planned in the first half of 2023, we expect to
demonstrate the organic strength of the business."
Business Update Subsequent to Q4-2022
- On February 9, 2023, the Company
announced the increase of its Global Credit Facility from
$500 million to $600 million under its accordion feature, with no
change to its existing credit terms.
- Related to partial use of proceeds, the Company has also since
signed a definitive agreement to acquire the remaining 25% stake in
Rednet which it does not already own. It expects to complete the
transaction before the end of Q1 and will provide more detail with
the complete results on March 15,
2023.
______________________________
|
4 Bookings
represents the gross contracted revenue based on actual revenue
recognized in the period, plus the change in bookings backlog from
the prior quarter
|
The Company cautions that the above results are preliminary in
nature and unaudited, as the Company's audit for the 2022 fiscal
year has not yet been completed. Actual results may differ
materially from these estimates due to the completion of the
Company's financial closing procedures, final adjustments, audit by
the Company's auditors and other developments that may arise
between now and the time the financial results are finalized. These
estimates are not a comprehensive statement of the Company's
financial results for Q4-2022 and FY22 and should not be viewed as
a substitute for full financial statements prepared in accordance
with International Financial Reporting Standards, and these
estimates are not necessarily indicative of the results to be
achieved for Q4-2022 and FY22. The preliminary results provided in
this press release constitute forward-looking statements within the
meaning of applicable securities laws, are based on a number of
assumptions and are subject to a number of risks and uncertainties.
Please see the section below entitled "Forward-Looking Statements".
The preliminary results have been prepared by, and are the
responsibility of, management of the Company. The Company's
independent registered public accounting firm, Ernst & Young
LLP, has not audited the preliminary results. Neither Ernst &
Young LLP nor any other independent accountants express an opinion
or any other form of assurance with respect to the preliminary
results.
The Company will provide additional discussion and analysis
regarding its fourth quarter revenue, gross profit, and Adjusted
EBITDA when the Company reports it quarterly and full year 2022
results on March 15, 2023, after
close of markets.
About Converge
Converge Technology Solutions Corp. is
a services-led, software-enabled, IT & Cloud Solutions provider
focused on delivering industry-leading solutions. Converge's global
approach delivers advanced analytics, application modernization,
cloud platforms, 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.
Non-IFRS Financial Measures
This release refers to
certain performance indicators including Adjusted EBITDA that does
not have any standardized meaning prescribed by IFRS and 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 results. These non-IFRS financial measures should
not be considered as an alternative to the consolidated income
(loss) or any other measure of performance under IFRS.
Adjusted EBITDA
Adjusted EBITDA represents net income or 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.
The Company uses Adjusted EBITDA to provide investors with a
supplemental measure of its operating performance and thus
highlight trends in its core business that may not otherwise be
apparent when relying solely on IFRS financial measures. The
Company 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 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.
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. 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 view them in conjunction with the most comparable IFRS
financial measures.
For Q4-2022, the Company expects to report between $40.8 million to $44.2
million of Adjusted EBITDA and has provided a reconciliation
to the most comparable IFRS financial measure as follows:
|
|
|
|
|
Q4-2022
|
|
Q4-2021
|
Net income (loss)
before taxes
|
$
|
(8,780)
|
$
|
(5,380)
|
|
$
|
10,568
|
Finance
expense
|
9,071
|
9,071
|
|
2,125
|
Share-based
compensation expense
|
1,422
|
1,422
|
|
1,132
|
Depreciation and
amortization
|
26,580
|
26,580
|
|
12,596
|
Foreign exchange loss
(gain)
|
942
|
942
|
|
5,669
|
Special
charges
|
11,565
|
11,565
|
|
2,595
|
Adjusted
EBITDA
|
$
|
40,800
|
$
|
44,200
|
|
$
|
34,685
|
For FY22, the Company expects to report between $140.6 million to $144.0
million of Adjusted EBITDA and has provided a reconciliation
to the most comparable IFRS financial measure as follows:
|
FY22
|
|
FY21
|
Net income before
taxes
|
$
|
19,023
|
$
|
22,423
|
|
$
|
23,974
|
Finance
expense
|
19,869
|
19,869
|
|
7,801
|
Share-based
compensation expense
|
5,594
|
5,594
|
|
2,325
|
Depreciation and
amortization
|
84,651
|
84,651
|
|
39,587
|
Foreign exchange loss
(gain)
|
(19,590)
|
(19,590)
|
|
647
|
Special
charges
|
31,057
|
31,057
|
|
19,701
|
Adjusted
EBITDA
|
$
|
140,604
|
$
|
144,004
|
|
$
|
94,035
|
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 filings statement 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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