Converge Reports Third Quarter 2024 Results
PR Newswire
TORONTO and GATINEAU, QC, Nov. 12, 2024
Year-to-date cash generated from operating activities increased by $97 million to $212 million, enabling continued net debt(1) reduction and a return of $61.7 million in capital to shareholders(1)
Announces Completion of Group CEO Transition and Appoints Greg Berard, CEO to the Company's Board of Directors
TORONTO and GATINEAU, QC, Nov. 12, 2024 /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 period ended September 30, 2024. All figures are in Canadian dollars unless otherwise stated.
Third Quarter 2024 Highlights (year-over-year, unless otherwise noted):
-- Gross sales1 of $945.0 million, a decrease of $91.8 million or 8.9%;
-- Gross sales organic growth1 of (8.4%) and gross profit organic growth1 of
(7.3%);
-- Revenue of $630.7 million, a decrease of $79.4 million or 11.2%;
-- Gross profit decreased 9.1% to $158.3 million, representing a gross
margin of 25.1%;
-- Adjusted EBITDA1 decreased 22.2% to $32.1 million;
-- Cash from operating activities was $48.9 million, a decrease of $47.1
million, compared to $95.9 million for the comparative period in the
prior year;
-- Returned $10.0 million of capital to shareholders1 as compared to $3.1
million return of capital to shareholders in Q3 FY23; and
-- Reduced net debt1 by $30 million from $157.9 million at Q2 2024;
maintaining a leverage ratio1 below 1.0x.
Year-To-Date 2024 Highlights (year-over-year, unless otherwise noted):
-- Gross sales1 of $3.0 billion, an increase of $55.4 million or 1.9%;
-- Gross sales organic growth1 of 2.0% and gross profit organic growth1 of
(1.0%);
-- Revenue of $1.9 billion, a decrease of $142.8 million;
-- Gross profit decreased 1.6% to $512.8 million, representing a gross
margin of 26.8%;
-- Adjusted EBITDA1 decreased 3.5% to $119.4 million;
-- Net loss of $171.8 million, an increase in loss of $160.6 million, driven
by the non-cash impairment charge on the Germany segment of $176.1
million;
-- Returned $61.7 million of capital to shareholders1 as compared to $19.4
million return of capital to shareholders for the comparative period in
prior year;
-- Cash from operating activities was $212.4 million, an increase of $97.3
million, compared to $115.1 million for the comparative period in the
prior year; and
-- Reduced net debt1 by $81.9 million to $127.8 million, from $209.8 million
at Q4 2023.
"While adverse macroeconomic conditions led to delays in hardware spending that impacted our third quarter results, we have already closed about 25% of the deals contributing to our gross profit shortfall and expect to close the remainder in Q4 and 2025. Meanwhile, we continued to see double-digit growth in our strategic investment areas--AI, cloud, and cybersecurity, driving growth in software and managed services revenue in the third quarter of 2024," said Greg Berard, CEO. "Our robust cash flow generation is a testament to our financial strength, and we are committed to executing a strategic and disciplined capital allocation approach to drive long-term value creation. This will be achieved through targeted, high-impact growth investments, while simultaneously returning a significant amount of capital to shareholders."
Financial Summary
3-month 3-month 9-month 9-month
In $000s except per share amounts Q3 2024 Q3 2023 Q3 2024 Q3 2023
--------------------------------- -------- --------- --------- ---------
Gross Sales(1) 945,006 1,036,760 3,014,662 2,959,258
Revenue 630,690 710,106 1,911,303 2,054,117
Gross profit $(GP)$ 158,257 174,090 512,813 521,351
Gross profit (GP) % 25.1 % 24.5 % 26.8 % 25.4 %
Adjusted EBITDA(1) 32,114 41,258 119,430 123,789
Adjusted EBITDA as a % of GP(1) 20.3 % 23.7 % 23.3 % 23.7 %
Net loss (3,309) (3,316) (171,812) (11,174)
Adjusted net income(1) 23,237 20,622 84,703 70,187
Adjusted EPS(1) 0.12 0.10 0.42 0.34
Subsequent to Quarter-End
-- On November 11, 2024, the Board declared a quarterly dividend of $0.015
per common share to be paid on December 28, 2024 to shareholders of
record at the close of business on December 10, 2024.
Financial Outlook
Converge is providing financial guidance for the three months ended December 31, 2024 and fiscal year ended December 31, 2024 as follows:
(expressed in millions of Canadian dollars)
Q4 2024 FY 2024
Q4 2023 Actual Expected FY 2023 Actual Expected
-------------- -------------- ------------- -------------- ---------------
Revenue $651.1 $600 - $646 $2,705.2 $2,511 - $2,558
Gross profit $181.5 $165 - $178 $702.9 $678 - $691
Adjusted
EBITDA $46.5 $36 - $47 $170.3 $155 - $166
Note: Q4 2023 Actual and FY 2023 Actual include results of Portage CyberTech Inc. ("Portage") which has been deconsolidated on June 27, 2024.
Completion of Group CEO Transition
Converge is announcing today that the previously disclosed Group CEO transition plan has progressed ahead of schedule. As a result, the Board of Directors (the "Board") has accepted Shaun Maine's decision to step down as Group CEO and member of the Board, effective immediately. Greg Berard, currently CEO of Converge, has been appointed as a member to the Company's Board of Directors.
"On behalf of the Board, I want to thank Shaun for his visionary leadership and the profound impact he's had since co-founding the Company in 2017," said Thomas Volk, Chair of the Board. "We are pleased to welcome Greg Berard as the newest member of the Board. Greg's leadership as operational CEO has been a tremendous asset to the Company, and we look forward to the fresh perspectives and wealth of experience that he will bring to the Board."
Conference Call Details:
Date: Tuesday, November 12(th) , 2024
Time: 8:00 AM Eastern Standard Time
Participant Webcast Link:
Webcast Link -- https://app.webinar.net/kPR1pwqzK50
Participant Dial-in Details with Operator Assistance:
Conference ID: 71060
Toronto: 1-416-945-7677
North American Toll Free: 1-888-699-1199
International Toll-Free Numbers:
Germany: 498005889782
Ireland: 35315251826
Spain: 34917918582
Switzerland: 41432107274
United Kingdom: 448002797040
You may register and enter your phone number to receive an instant automated call back via https://emportal.ink/3BJcbwy.
Recording Playback:
Webcast Link - https://app.webinar.net/kPR1pwqzK50
Toronto: 1-289-819-1450
North American Toll Free: 1-888-660-6345
Replay Code: 71060 #
Expiry Date: November 19(th) , 2024
Please connect at least 15 minutes prior to the conference call to ensure time for any software download that may be required to access the webcast. A live audio webcast accompanied by presentation slides and archive of the conference call and webcast will be available by visiting the Company's website at https://convergetp.com/investor-relations/.
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, artificial intelligence (AI), 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.
Summary of Condensed Consolidated Interim Statements of Financial Position
(expressed in thousands of Canadian dollars) (unaudited)
September 30, December 31,
2024 2023
$ $
----------------------------------------------- ------------- ------------
Assets
Current
Cash 180,464 170,419
Trade and other receivables 775,026 803,652
Inventories 71,753 73,166
Prepaid expenses and other assets 34,111 26,528
---------------------------------------------- ------------- ------------
1,061,354 1,073,765
Non-current
Investment in associates 27,909 -
Unbilled receivables and other assets 202,290 64,158
Property, equipment and right-of-use assets,
net 66,621 75,488
Intangible assets, net 272,646 375,181
Goodwill 385,022 564,770
Total assets 2,015,842 2,153,362
----------------------------------------------- ------------- ------------
Liabilities
Current
(MORE TO FOLLOW) Dow Jones Newswires
November 12, 2024 07:15 ET (12:15 GMT)
Comments