FOR IMMEDIATE RELEASE
January 31, 2020 – VANCOUVER, BRITISH COLUMBIA AND TORONTO, ONTARIO, CANADA – Converge Technology Solutions Corp. (“Converge” or “Company”) (TSXV:CTS) (FSE:0ZB) (OTCQX:CTSDF), a Software Enabled Hybrid IT Solutions Provider, today announced preliminary full year and fourth quarter results for 2019. All figures are in CAD dollars unless otherwise stated.
Fourth quarter results of operations have not been finalized; however, net revenue is expected to be approximately $210 – $220 million (compared to $136 million in Q4 2018 and $144 million in the third quarter of 2019). As a result of its fourth quarter preliminary results, the Company expects full-year 2019 reported revenue to be approximately $683 – $698 million (compared to $459 million in 2018).
Fourth quarter gross profit is expected to be approximately $52 – $55 million (compared to $30.3 million in Q4 2018 and $34.9 million in the third quarter of 2019), or approximately 23.4 % – 23.6% gross profit margin compared to 22% in Q4 2018 and 24% in the third quarter of 2019. Gross profit for 2019 is estimated to be approximately $160 – $165 million (compared to $90 million in 2018) and gross margin for all of 2019 is estimated to be approximately 23% – 23.2%.
The Company expects to report Adjusted EBITDA1 for the fourth quarter of approximately $10 – 12 million, resulting in approximately $30 – $32 million in Adjusted EBITDA1 for the full year 2019. This compares to Adjusted EBITDA1 of $5.8 million for the third quarter of 2019 and $16.5 million for 2018.
Actual results may differ materially from these estimates due to the completion of the Company’s financial closing procedures, final adjustments, review 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 2019 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 2019. 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 Information”. The Company will provide additional discussion and analysis regarding its fourth quarter revenue, margin and Adjusted EBITDA1 when the Company reports it quarterly and full year 2019 results on or before North American markets open on March 26, 2020 and the Company will host its regular quarterly conference call on that date.
“We are delighted to share these strong preliminary results with the market” said Shaun Maine, CEO of Converge. “As we enter 2020, we are excited to see the financial contribution of the acquisitions we completed in 2019 and we will continue to execute on our strategy as we aim to build one of the premier software enabled Hybrid IT Solutions Providers in North America. Thank you to all of our employees, customers, and partners for helping us to achieve tremendous success in 2019”.
The Company also announced today that Chief Financial Officer Mary Anne Palangio will be leaving the Company effective April 1, 2020 to take a Chief Financial Officer position with the Canadian Securities Exchange, where she has served on the Board and as Chair of the Audit Committee, and that Ron Hinkle will become the Company’s Interim Chief Financial Officer on that date. Ron is currently the US CFO of Converge and previously served as CFO of Converge subsidiary Corus 360. Ron brings over 25 years of financial experience to Converge. Mary Anne will remain with the Company through the completion of the audit of the Company’s 2019 financial statements.
Mr. Maine said “On behalf of the Company I would like to thank Mary Anne for her contributions to the success of the business over the last year and half and wish her every success in the future.”
- 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.
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
For further information contact:
Mary Anne Palangio
Chief Financial Officer Virtus Advisory Group
Converge Technology Solutions Corp. Shareholder Inquiries
Email: email@example.com Email: firstname.lastname@example.org
Phone: 416-360-1495 Phone: 416-644-5081
Notice to Reader: Use of Non-IFRS Financial Measures and Forward-Looking Statements
1. 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.
2. 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.
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.