Converge Reports Preliminary Third Quarter 2024 Results

TORONTO and GATINEAU, QC, Oct. 24, 2024 /PRNewswire/ - Converge Technology Solutions Corp. ("Converge" or "the Company") (TSX:CTS) (FSE: 0ZB) (OTCQX:CTSDF) today announced select preliminary unaudited financial results for the three months ended September 30, 2024 ("Q3-2024"). All figures are in Canadian dollars unless otherwise stated. 

Q3-2024 Preliminary Results 

Revenue is expected to be in the range of $630.0 million to $631.0 million, compared to (i) a previously guided range of $636 million to $658 million, and (ii) $710.1 million in revenue for the third quarter of 2023 ("Q3-2023").

Gross profit is expected to be in the range of $158.0 to $158.5 million, compared to (i) a previously guided range of $172 million to $178 million, and (ii) $174.1 million in gross profit for Q3-2023.

Adjusted EBITDA1 is expected to be in the range of $31.8 to $32.3 million, compared to, (i) a previously guided range of $43 million to $47 million, and (ii) $41.3 million in Adjusted EBITDA1 for Q3-2023.

Cash from operating activities is expected to be in the range of $48.0 to $49.0 million, representing cash conversion1 of approximately 150% from Adjusted EBITDA1.

 [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.

Q3-2024 Commentary

Q3-2024 revenue was impacted by adverse macroeconomic conditions as certain customers delayed project spend as timelines shifted into the fourth quarter of 2024 or potentially the next fiscal year. Compared to Q3-2023, Q3-2024 revenue declined due to lower demand in North America for data center, networking, and storage solutions whereas Q3-2023 included a period of abnormally strong backlog fulfillment. Historically, the third quarter ended September 30 has been the weakest quarter from a seasonality perspective. In addition, refresh activity on end user devices continues to be pushed into 2025 as some customers are pausing the purchase cycle in advance of wider availability of AI PC's. This resulted in reduced hardware and associated maintenance & support revenue. Cloud and software revenue has continued to increase year over year.

Subsequent to Q3-2024, the Company successfully completed the migration to its new enterprise resource planning ("ERP") system. The new ERP system is expected to enable ongoing improvements in key systems and processes leading to greater operating efficiencies.

"While companies have remained conservative with their capex spend, particularly in hardware, we continued to see double-digit growth in our strategic investment areas around cloud, cybersecurity, software, and managed services in the third quarter of 2024," said Greg Berard, Converge CEO. "We remain committed to leveraging our healthy pipeline into the fourth quarter of 2024 and, with the successful implementation of our new ERP system, we will look for greater efficiencies to help drive the cash flow performance of our business."

Complete financial results for Q3-2024 along with an updated financial outlook for the fiscal year ended December 31, 2024 will be published before the markets open on the Toronto Stock Exchange on Tuesday, November 12, 2024. Further information and conference call webcast and dial-in details are available on the Company's Investor Relations website.

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 ...