Converge Technology Solutions Reports Third Quarter 2020 Financial Results

/NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES/

VANCOUVER, BC and TORONTO, Nov. 9, 2020 /CNW/ - Converge Technology Solutions Corp. ("Converge" or "Company") (TSXV: CTS) (FSE: 0ZB) (OTCQX: CTSDF) is pleased to provide its financial results for the three and nine month period ended September 30, 2020.  All figures are in CAD dollars unless otherwise stated.

Recent Highlights

• Third quarter revenue increased 31% over last year to $189.9
• Gross profit increased 50% over last year to $52.4 million and margins increased to 27.6% from 24.1% last year
• Adjusted EBITDA increased 151% to $14.6 million from $5.8 million last year
• Signed a three-year committed $140 million revolving credit facility that will result in material interest cost savings going forward
• Raised $54.6 million in two equity offerings consisting of $20.1 million at $1.62 per common share and $34.5 million at $2.05 per common share.
• Acquired Unique Digital, a Texas-based IT Solution Provider focused on Architecting and implementing solutions in big data, cloud, networking, security and virtualization
• Ranked first on the 2020 CRN Fast Growth 150 List
• Achieved highest tier Titanium Partner status with Dell technologies

"We are a much stronger company due to our Q3 activities, and our Q3 financials show the results of our Phase 3 cost savings initiatives and integration" said Shaun Maine, CEO of Converge.  "In Q3, we generated record adjusted EBITDA, we raised $54.6 million in two successful bought deal equity financings and last week we refinanced our credit facility, entering into a new $140 million facility with a syndicate of Canadian banks.  We enter the fourth quarter with a strong balance sheet and cost of debt that we estimate will generate $ 8 million of annual interest savings in addition to our significant SG&A savings. During the quarter, we completed the integration of another three back offices and the cost savings of these integrations and removing duplicated front office costs are reflected in the third quarter financial results with a $5.4 million sequential decrease in SG&A. In addition, shortly after the quarter we announced the acquisition of Unique Digital, a strong Dell and VMWare partner, which now gives us access to the very lucrative Texas marketplace."

Third 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.

Conference Call Details:

Date: Monday, November 9^th, 2020
Time: 5:00 PM Eastern Time

Participant Dial-in Numbers:
Local – Toronto ([phone]
Toll Free – North America ([phone]
Germany – 08007240293
United Kingdom - 08006522435
Conference ID: 53771605

Recording Playback Numbers:
Toronto ([phone]
Toll Free – North America ([phone]
Passcode: 771605#
Expiry Date: November 16^th, 2020

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

		September 30, 2020	December 31, 2019
Assets
Current assets
	Cash	$         59,051	$             20,590
	Restricted cash	8,053	7,848
	Trade and other receivables	186,349	220,138
	Inventories	25,201	23,376
	Prepaid expenses and other assets	12,042	15,232
		290,696	287,184
Long-term assets
	Property, equipment, and right-of-use assets, net	22,012	27,428
	Intangible assets, net	89,692	92,047
	Goodwill	89,858	80,271
	Other non-current assets	796	1,954
		$       493,054	$           488,884
Liabilities
Current liabilities
	Trade and other payables	$       254,185	$           248,218
	Borrowings	91,402	142,123
	Other financial liabilities	26,706	35,734
	Convertible debenture	5,090	5,114
	Debentures	4,013	3,629
	Deferred revenue and other liabilities	15,081	9,737
	Income taxes payable	-	660
		396,477	445,215
Long-term liabilities
	Other financial liabilities	27,614	33,111
	Borrowings	15,158	14,573
	Deferred tax liability	5,495	5,862
		$       444,744	$           498,761
Shareholders' equity (deficiency)
	Common shares	83,711	20,612
	Warrants	-	243
	Contributed surplus	307	307
	Exchange rights	4,853	6,773
	Foreign exchange translation reserve	(334)	69
	Deficit	(40,227)	(37,881)
		48,310	(9,877)
		$       493,054	$           488,884

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

		For the three months ended September 30,				For the nine months ended September 30,
		2020		2019		2020		2019
Revenues
Product	$	143,450	$	113,797	$	509,141	$	374,316
Service		46,425		30,707		150,101		98,774
Total revenue		189,875		144,504		659,242		473,090
Cost of sales		137,480		109,615		497,163		364,856
Gross profit		52,395		34,889		162,079		108,234
Selling, general and administrative expenses		38,942		29,814		128,518		91,078
Income before the following		13,453		5,075		33,561		17,156
Depreciation and amortization		5,180		3,225		16,204		8,409
Finance expense, net		5,138		3,880		15,953		10,527
Special charges		1,865		4,511		7,914		8,190
Other expense		506		466		(114)		919
Income (loss) before income taxes		764		(7,007)		(6,396)		(10,889)
Income tax expense (recovery)		70		70		(1,271)		1,544
Net income (loss)	$	694	$	(7,077)	$	(5,125)	$	(12,433)
Other comprehensive loss
Exchange loss (gain) on translation of foreign operations		(345)		155		403		(43)
Comprehensive income (loss)	$	1,039	$	(7,232)	$	(5,528)	$	(12,390)
Adjusted EBITDA	$	14,619	$	5,827	$	37,119	$	19,790

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 September 30,		For the nine months ended September 30,
	2020	2019	2020	2019
Net income (loss) before taxes	$     764	$  (7,007)	$  (6,396)	$  (10,889)
Finance expense	5,138	3,880	15,953	10,527
Depreciation and amortization	5,180	3,225	16,204	8,409
Depreciation included in cost of sales	1,271	1,348	4,052	3,488
Foreign exchange loss (gain)	401	(130)	(608)	65
Special charges	1,865	4,511	7,914	8,190
Adjusted EBITDA	$    14,619	$    5,827	$ 37,119	$  19,790

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.

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.

SOURCE Converge Technology Solutions Corp.

Converge Technology Solutions Corp., Email: [email protected], Phone: [phone]

Related Links

https://convergetp.com/