Gross Sales1 Top $4.0 Billion in FY 2023;
Q4 Marks Consecutive Billion Dollar Quarter
TORONTO and GATINEAU, QC, March 6, 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 months and fiscal year ended December 31, 2023. All figures are in Canadian dollars unless otherwise stated.
Fourth Quarter 2023 Highlights (year-over-year, unless otherwise noted):
Gross sales1 of $1.08 billion, an increase of $121.9 million or 12.7%;
Gross sales organic growth1 of 10.9% and gross profit organic growth1 of 5.7%;
Revenue of $651.1 million, an increase of $10.2 million;
Gross profit increased 7.5% to $181.5 million representing a gross margin of 27.9%;
Adjusted EBITDA1 increased 8.0% to $46.5 million;
Net income of $4.8 million, an increase of $9.4 million;
Cash from operating activities was $114.5 million, an increase of $84.1 million, compared to $30.4 million for the comparative period in the prior year;
Reduced net debt1 by $52.0 million year-over-year and by $97.7 million compared to Q3, FY23 to $209.8 million, representing a Leverage Ratio1 of 1.23x as at December 31, 2023; and
Product backlog2 at the end of the fourth quarter 2023 was $412 million, a decrease of $67 million from the comparative period in the prior year.
Fiscal Year 2023 Highlights (year-over-year, unless otherwise noted):
Gross sales1 of $4.04 billion in the year, up from $3.09 billion, representing an increase of 30.6%;
Gross sales organic growth1 of 10.9% and gross profit organic growth of 8.1%;
Revenue of $2.71 billion, up from $2.16 billion, representing an increase of 25.0%;
Gross profit of $702.9 million, an increase of 27.6% from $550.8 million for the comparative period in the prior year
Adjusted EBITDA1 of $170.3 million, up $27.4 million or 19.2% year over year;
Cash from operating activities amounted to $229.5 million, an increase of $188.0 million; and
Repurchased 5.3 million shares for an aggregate investment of $17.3 million.
“We are entering 2024 with significant pipeline momentum, propelled by demand for legacy modernizations, for advanced customer-centric solutions, and by the massive surge of interest in artificial intelligence (AI) solutions,” said Shaun Maine, Group CEO. “We are extremely well positioned – strategically, operationally and financially – to capitalize on this tailwind to drive industry-leading growth and to continue improving our margin profile, our visibility and by leveraging our cash generating abilities for the benefit of our shareholders.”
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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 press 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 for Canada and United States.
Financial Summary
In $000s except per share amounts
Q4 2023
Q4 2022
FY 2023
FY 2022
Gross Sales
1,078,663
956,803
4,037,901
3,090,981
Revenue
651,090
640,927
2,705,207
2,164,647
Gross profit (GP)
181,529
168,916
702,880
550,768
Gross profit (GP) %
27.9 %
26.4 %
26.0 %
25.4 %
Adjusted EBITDA
46,505
43,064
170,294
142,868
Subsequent to Quarter-End
On March 5, 2024, the Board declared a quarterly dividend of $0.01 per common share to be paid on March 26, 2024 to shareholders of record at the close of business on March 12, 2024.
Financial Outlook
Converge is providing the following guidance for the three months ended March 31, 2024 (Q1 2024) and fiscal 2024 (Fiscal 2024) as follows:
Q1 2024 Expected
FY 2024 Expected
Gross profit
$170 million – $178 million
$735 million – $760 million
Adjusted EBITDA
$40 million – $44 million
$185 million – $198 million
Conference Call Details:
Date: Wednesday, March 6th, 2024
Time: 8:00 AM Eastern Standard Time
Participant Webcast Link:
Webcast Link – https://app.webinar.net/qvbWB9Znmdx
Participant Dial-in Details with Operator Assistance:
Conference ID: 48044078
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
You may register and enter your phone number to receive an instant automated call back via https://emportal.ink/4bgx1AU
Recording Playback:
Webcast Link – https://app.webinar.net/qvbWB9Znmdx
Toronto: 416-764-8677
North American Toll Free: 1-888-390-0541
Replay Code: 044078 #
Expiry Date: March 13th, 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 Consolidated Statements of Financial Position
(expressed in thousands of Canadian dollars)
December 31, 2023
December 31, 2022
Assets
Current
Cash
$
169,872
159,890
Restricted cash
547
5,230
Trade and other receivables
814,231
781,683
Inventories
73,166
158,430
Prepaid expenses and other assets
26,528
23,046
1,084,344
1,128,279
Non-current
Other assets
53,579
4,646
Property, equipment, and right-of-use assets, net
75,488
88,352
Intangible assets, net
375,181
463,751
Goodwill
564,770
563,848
Total assets
$
2,153,362
2,248,876
Liabilities
Current
Trade and other payables
$
913,994
824,924
Other financial liabilities
54,095
123,932
Deferred revenue
59,325
60,210
Borrowings
1,664
421,728
Income taxes payable
9,286
7,112
1,038,364
1,437,906
Non-current
Other financial liabilities
57,668
77,183
Borrowings
378,007
–
Deferred tax liabilities
67,168
102,977
Total liabilities
$
1,541,207
1,618,066
Shareholders’ equity
Common shares
599,434
595,019
Contributed surplus
10,970
7,919
Exchange rights
–
1,705
Accumulated other comprehensive income
3,963
13,708
Deficit
(28,167)
(18,441)
Total equity attributable to shareholders of Converge
586,200
599,910
Non-controlling interest
25,955
30,900
612,155
630,810
Total liabilities and shareholders’ equity
$
2,153,362
2,248,876
Summary of Consolidated Statements of Loss and Comprehensive Loss
(expressed in thousands of Canadian dollars)
Three months ended
December 31,
Twelve months ended
December 31,
2023
2022
2023
2022
Revenue
Product
$
490,948
507,630
2,098,880
1,700,667
Service
160,142
133,297
606,327
463,980
Total revenue
651,090
640,927
2,705,207
2,164,647
Cost of sales
469,561
472,011
2,002,327
1,613,879
Gross profit
181,529
168,916
702,880
550,768
Selling, general and administrative expenses
137,451
126,377
541,118
413,644
Income before the following
44,078
42,539
161,762
137,124
Depreciation and amortization
29,212
20,363
111,451
75,114
Finance expense, net
10,355
9,062
41,225
19,860
Acquisition, integration, restructuring and other
2,679
4,621
13,648