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Converge Technology Solutions Reports Fourth Quarter and Fiscal Year 2020 Financial Results


TORONTO and GATINEAU, QC, March 9, 2021 /PRNewswire/ –  Converge Technology Solutions Corp. (“Converge” or “the Company“) (TSX:CTS) (FSE:0ZB) (OTCQX:CTSDF) a national platform of regionally focused Hybrid IT solution providers in the U.S. and Canada, is pleased to provide its financial results for the three and twelve month periods ended December 31, 2020.  All figures are in CAD dollars unless otherwise stated.

Q420 & FY20 Highlights

  • Fourth quarter revenue increased 35% over the last year to $289.6 million and annual revenue increased 38% to $948.8 million
  • Fourth quarter adjusted EBITDA increased 98% over the last year to $23.4 and annual adjusted EBITDA increased 92% to $60.5 million
  • Fourth quarter net income was $1.0 million and annual net loss was $4.2 million
  • Strengthened the balance sheet with $109 million of equity raised in 2020
  • Completed front office integration of 12 subsidiaries, resulting in over $20 million of estimated annualized cost savings
  • Closed a three-year committed $140 million revolving credit facility that will result in over $8 million in estimated annual interest cost savings
  • Completed five acquisitions in 2020 including Quebec-based PCD Solutions, Inc., Texas-based Unique Digital, Inc., Missouri-based Workgroup Connections, Inc., Saskatchewan-based Vivvo Applications Studio LTD., and US Northeast-based Vicom Computer Services, Inc.
  • Ranked as fastest growing Company on the 2020 CRN Fast Growth 150 List; named Red Hat Rising Star Partner of the Year; awarded 2020 Ingram Micro Cloud Reseller Partner of the Year North America; achieved Network Virtualization and Cloud Management & Automation VMware Master Competencies; achieved Titanium Partner status with Dell Technologies; and received Cisco CX Specialization Status

Subsequent to Quarter in 2021

  • Closed $86.5 million equity financing at $4.85 per common share in January 2021
  • Recognized as a top-performing Company on the OTCQX Best 50 List and the TSX Venture 50 List for 2 years in a row
  • Graduated to the TSX from the TSX Venture Exchange on February 11th, 2021
  • Completed two acquisitions including CarpeDatum LLC, an AI and analytics specialist and Accudata Systems, Inc., a cybersecurity and managed services provider

“Converge has never been stronger or better positioned for continued growth than it is today”, said Shaun Maine, CEO of Converge.  “Our recent efforts ranging from the strengthening of our balance sheet, to the expansion of our geographical reach into valuable marketplaces such as Texas, to our recent graduation to the TSX, put us in an ideal position to meet the IT solutions needs of our large and growing base of customers. We had our strongest quarter to date in Q4, generating $289.5 million of revenue and $23.4 million of adjusted EBITDA.  Annually adjusted EBITDA growth was over 90% for the second year in a row.  We also welcomed a number of new institutional and individual investors as shareholders over the past year and will continue to focus on growth and executing on our business strategy for the benefit of all Converge stakeholders.”

“For our team to have produced these results while managing the pressure and demands of COVID-19, truly speaks volumes to the dedication and ambition of every one of our employees,” added Greg Berard, President of Converge. “As we celebrate the achievements and overcoming the adversity 2020 presented us with, we will harness that momentum to help drive further meaningful growth in the year to come.”

Fourth Quarter Conference Call

The Company will host a conference call featuring management’s quarterly remarks and follow-up question and answer period. 

A recording of the call will be available and posted on the Company’s website. Dial-in details can be found below.

A live audio webcast 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.

Conference Call Details:

Date: Tuesday, March 9th, 2021
Time: 5:00 PM Eastern Time

Participant Dial-in Numbers:
Local – Toronto (+1) 416 764 8609
Toll Free – North America (+1) 888 390 0605
Germany – 08007240293
United Kingdom – 08006522435
Conference ID: 40845533

Recording Playback Numbers:
Toronto (+1) 416 764 8677
Toll Free – North America (+1) 888 390 0541
Passcode: 845533#
Expiry Date: March 16th, 2021

Consolidated Statements of Financial Position 
(expressed in thousands of Canadian dollars)                                                    


December 31, 2020

December 31, 2019

Assets



Current assets




 Cash

$

64,767

$

20,590


 Restricted cash

7,848


 Trade and other receivables

364,308

220,138


 Inventories

37,868

23,376


 Prepaid expenses and other assets

10,376

15,232



477,319

287,184

Long-term assets




Property, equipment, and right-of-use assets, net

23,558

27,428


Intangible assets, net

108,926

92,047


Goodwill

110,068

80,271


Other non-current assets

749

1,954



$

720,620

$

488,884





Liabilities



Current liabilities




Trade and other payables

$

398,003

$

248,218


Borrowings

133,281

142,123


Other financial liabilities

22,125

35,734


Convertible debenture

5,114


Debentures

3,629


Deferred revenue and other liabilities

17,376

9,737


Income taxes payable

764

660



571,549

445,215

Long-term liabilities




Other financial liabilities

28,858

33,111


Borrowings

5,882

14,573


Deferred tax liability

12,584

5,862



$

618,873

$

498,761





Shareholders’ equity (deficiency)




Common shares

135,354

20,612


Warrants

243


Contributed surplus 

307


Exchange rights

4,853

6,773


Foreign exchange translation reserve

817

69


Deficit

(39,277)

(37,881)



101,747

(9,877)



$

720,620

$

488,884

Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)
(expressed in thousands of Canadian dollars)                                                    



For the three months ended
December 31,


For the twelve months ended
December 31,



2020


2019


2020


2019










Revenues









Product

$

241,091

$

159,459

$

750,232

$

539,719

Service


48,466


55,246


198,567


148,076

Total revenue


289,557


214,705


948,799


687,795

Cost of sales


218,630


161,350


715,793


526,211

Gross profit


70,927


53,355


233,006


161,584










Selling, general and administrative expenses 


49,179


42,821


177,697


133,899

Income before the following


21,748


10,534


55,309


27,685










Depreciation and amortization


5,262


4,648


21,466


13,057

Finance expense, net


3,719


5,499


19,672


16,026

Special charges


7,149


2,455


15,063


10,640

Other expense (income)


1,723


(200)


1,609


719

Income (loss) before income taxes


3,895


(1,868)


(2,501)


(12,757)










Income tax expense (recovery)


2,945


(3,461)


1,674


(1,917)










Net income (loss)

$

950

$

1,593

$

(4,175)

$

(10,840)










Other comprehensive gain









Exchange loss (gain) on translation


(1,151)


(741)


(748)


(784)

of foreign operations

Comprehensive income (loss)

$

2,101

$

2,334

$

(3,427)

$

(10,056)










Adjusted EBITDA

$

23,375

$

11,832

$

60,493

$

31,622











Adjusted EBITDA (Non-IFRS Financial Measurement) 

Adjusted EBITDA represents net loss or income adjusted to exclude amortization, depreciation, interest expense and finance costs, foreign exchange gains and losses, 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 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.

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. The Company has reconciled Adjusted EBITDA to the most comparable IFRS financial measure as follows:


For the three months

ended December 31,

For the twelve months

ended December 31,


2020

2019

2020

2019

Net income (loss) before taxes

$

3,895

$

(1,868)

$

(2,501)

$

(12,756)

Finance expense

3,719

5,499

19,672

16,026

Depreciation and amortization

5,262

4,648

21,466

13,057

Depreciation included in cost of sales

1,058

1,342

5,109

4,830

Foreign exchange loss (gain)

3,486

(244)

2,878

(155)

PPP loan forgiveness

(1,194)

(1,194)

Special charges

7,149

2,455

15,063

10,620

Adjusted EBITD

$

23,375

$

11,832

$

60,493

$

31,622

About Converge 
Converge Technology Solutions Corp. is a North American software-enabled, Hybrid IT solution provider focused on delivering industry-leading solutions and services. Converge’s regional sales and services organizations deliver advanced analytics, cloud, cybersecurity, and managed services offerings to clients across various industries. The Company supports these solutions with talent expertise and digital infrastructure offerings 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.

  1. 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.

SOURCE Converge Technology Solutions Corp.

Related Links

https://convergetp.com/



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