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Converge Technology Solutions Reports Second Quarter 2022 Financial Results

·20 min read
Converge Technology Solutions Corp.
Converge Technology Solutions Corp.

TORONTO and GATINEAU, Quebec, Aug. 09, 2022 (GLOBE NEWSWIRE) -- Converge Technology Solutions Corp. (“Converge” or “the Company”) (TSX:CTS) (FSE:0ZB) (OTCQX:CTSDF) is pleased to provide its financial results for the three and six months ended June 30, 2022. All figures are in Canadian dollars unless otherwise stated.

Financial Summary

In $000s except per share amounts



Q2 2022



Q2 2021

Growth %



H1 2022



H1 2021

Growth %

Gross revenues

 

729,678

 

 

452,120

 

61

%

 

1,403,607

 

 

860,220

 

63

%

Net revenues

 

596,656

 

 

345,307

 

73

%

 

1,146,693

 

 

655,509

 

75

%

Gross profit (GP)

 

133,152

 

 

78,244

 

70

%

 

242,196

 

 

146,040

 

66

%

Gross profit (GP) %

 

22.3

%

 

22.7

%

 

 

21.1

%

 

22.3

%

 

Adjusted EBITDA

 

39,188

 

 

21,720

 

80

%

 

68,837

 

 

40,488

 

70

%

Adjusted EBITDA as a % of GP

 

29.4

%

 

27.8

%

 

 

28.4

%

 

27.7

%

 

Adjusted EBITDA as a % of Net Revenue

 

6.6

%

 

6.3

%

 

 

6.0

%

 

6.2

%

 

Net income

 

11,678

 

 

1,025

 

1039

%

 

9,270

 

 

4,690

 

98

%

Net income per diluted share

$0.05

 

$0.01

 

400

%

$0.05

 

$0.03

 

67

%

Adjusted net income

 

29,900

 

 

14,148

 

111

%

 

52,410

 

 

26,164

 

100

%

Adjusted EPS

$0.14

 

$0.08

 

75

%

$0.24

 

$0.16

 

50

%

Financial highlights for the three-month period ended June 30, 2022 (“Q2-2022”):

  • Q2-2022 net revenue increased 73% over the same quarter last year (“Q2-2021”) to $596.7 million

  • Q2-2022 gross profit increased 70% over last year to $133.2 million

  • Adjusted EBITDA1 increased 80% to $39.2 million from $21.7 million last year

  • For Q2-2022, the Company generated Adjusted Free Cashflow and Adjusted Free Cash Flow Conversion1 of $33.8 million and 86%, respectively

  • Reported Adjusted EPS1 of $0.14 per share for Q2-2022 increasing by 75% from $0.08 per share in Q2-2021

  • Organic gross revenue growth1 for Q2-2022 was approximately 8.5%

  • Product Bookings backlog2 increased to approximately $507 million in Q2-2022 compared to $472 million in Q1-2022, after clearing $375 million worth of Q1 backlog during the quarter

  • Q2-2022 Services Backlog2 was approximately $71 million compared to $45 million in Q1-2022

  • Achieved 109 net new logos in Q2-2022, securing 220 net new logos in H1-2022

___________________________________
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 news 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.

Q2-2022 Business Highlights & Subsequent to Quarter

  • Acquired approximately $939.2 million of LTM gross revenue and $56.0 million EBITDA through 8 acquisitions year-to-date including Paragon Development Systems, Inc. (“PDS”); Visucom GmbH (“Visucom”); 1CRM Systems Corp. (“1CRM”); Creative Breakthroughs, Inc. (“CBI”); Interdynamix Systems (IDX); Solutions Notarius Inc. (“Notarius”); Gesellschaft für digitale Bildung, Institur für modern Bildung, and DEQSTER (collectively “GfdB”); and Technology Integration Group (“TIG”).

  • Announced a refinanced, five-year $500 million global revolving credit facility (the “Global Credit Facility”), led by J.P. Morgan and Canadian Imperial Bank of Commerce as joint lead arrangers with the Bank of Nova Scotia, the Toronto-Dominion Bank, and the Bank of Montreal participating in the lender group

  • The Global Credit Facility includes an uncommitted accordion feature of $100 million, for a total borrowing capacity of up to $600 million; double the Company’s existing ABL credit facility of $300 million

  • Converge announced TSX approval of Normal Course Issuer Bid to commence August 11, 2022 allowing the Company to purchase for cancellation up to an aggregate of 10,744,818 common shares

  • Expanded Converge Board of Directors with addition of Dr. Toni Rinow, bringing more than 20 years of international experience as a transformational finance and business leader

  • Converge ranked within the top 40 for both CRN® 2022 Solution Provider 500 list and CRN Fast Growth 150 list and placed eighth on 2022 CDN Top 100 Solution Providers

“We continue to report record financial results, and I am incredibly proud that Converge grew by over 70% year-over-year across revenue, gross profit and Adjusted EBITDA,” said Shaun Maine, CEO of Converge. “Despite the macroeconomic challenges faced in the consumer market, business demand for digital transformation and hybrid IT solutions remains robust while the deep technical skills that Converge possesses surrounding analytics, cybersecurity, cloud and managed services remain scarce, especially in the mid-market. I’m proud of the fact that the Company has executed on our stated acquisition plans, closing 8 acquisitions to date including GfdB and TIG completed after quarter end, equating to approximately $939 million in LTM gross revenue and $56 million in Adjusted EBITDA year-to-date. Our North American team continues to refine their acquisition, integration, and cross-selling strategies, and it is my great pleasure to announce that in addition to Greg Berard’s role as President, he will now become the North American CEO to clarify his operational role in North America to customers, partners and employees.”

Conference Call Details:

Date: Wednesday, August 10th, 2022
Time: 8:00 AM Eastern Time

Participant Webcast Link:
Webcast Link - https://edge.media-server.com/mmc/p/v2nkhevw

Participant Dial-in Details:
If you prefer to access via dial-in, please register using the following link:
Telco registration link - https://register.vevent.com/register/BI707975370dcf415a8327af0e0d732e8d

Once registered, you will receive a unique dial-in number and PIN. To avoid delays we encourage participants to register a minimum of fifteen minutes ahead of the scheduled start time. Registration is now open.

Recording Playback:
A recording of the webcast will be available after the call using the following link:
Webcast Link - https://edge.media-server.com/mmc/p/v2nkhevw
Expiry Date: August 10th, 2023

About Converge
Converge Technology Solutions Corp. is a software-enabled IT & Cloud Solutions provider focused on delivering industry-leading solutions and services. Converge’s global solution approach delivers advanced analytics, application modernization, cloud, 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.

For further information contact:

Converge Technology Solutions Corp.
Email: investors@convergetp.com
Phone: 416-360-1495

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

 

June 30, 2022

 

December 31, 2021

 

Assets

 

 

Current assets

 

 

 

Cash

$

184,175

 

$

248,193

 

 

Restricted cash

 

4,375

 

 

-

 

 

Trade and other receivables

 

597,468

 

 

416,499

 

 

Inventories

 

119,264

 

 

104,254

 

 

Prepaid expenses and other assets

 

17,855

 

 

11,762

 

 

 

 

923,137

 

 

780,708

 

Long-term assets

 

 

 

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

 

49,097

 

 

30,642

 

 

Intangible assets, net

 

355,968

 

 

233,586

 

 

Goodwill

 

421,786

 

 

323,284

 

 

Other non-current assets

 

609

 

 

617

 

 

 

$

1,750,597

 

$

1,368,837

 

 

 

 

 

Liabilities and shareholders’ equity

 

 

Current liabilities

 

 

 

Trade and other payables

$

647,488

 

$

519,434

 

 

Borrowings

 

192,257

 

 

816

 

 

Other financial liabilities

 

31,926

 

 

29,407

 

 

Deferred revenue

 

52,391

 

 

27,581

 

 

Income taxes payable

 

7,297

 

 

13,977

 

 

 

 

931,359

 

 

591,215

 

Long-term liabilities

 

 

 

Other financial liabilities

 

86,347

 

 

85,296

 

 

Borrowings

 

80

 

 

412

 

 

Deferred tax liability

 

72,850

 

 

43,086

 

 

 

$

1,090,636

 

$

720,009

 

 

 

 

 

Shareholders' equity

 

 

 

Common shares

 

633,809

 

 

633,489

 

 

Contributed surplus

 

5,222

 

 

2,325

 

 

Exchange rights

 

2,076

 

 

2,396

 

 

Accumulated other comprehensive (loss) income

 

(705

)

 

329

 

 

Deficit

 

(14,827

)

 

(25,050

)

Total equity attributable to shareholders of Converge

 

625,575

 

 

613,489

 

Non-controlling interest

 

34,386

 

 

35,339

 

 

 

 

659,961

 

 

648,828

 

 

 

$

1,750,597

 

$

1,368,837

 


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

 

 

Three months ended June 30,

 

 

Six months ended June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

 

 

 

 

 

 

 

 

Revenues

 

 

 

 

 

 

 

 

Product

$

491,821

 

$

281,287

 

$

945,210

 

$

533,794

 

Service

 

104,835

 

 

64,020

 

 

201,483

 

 

121,715

 

Total revenue

 

596,656

 

 

345,307

 

 

1,146,693

 

 

655,509

 

Cost of sales

 

463,504

 

 

267,063

 

 

904,497

 

 

509,469

 

Gross profit

 

133,152

 

 

78,244

 

 

242,196

 

 

146,040

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

95,823

 

 

57,630

 

 

176,235

 

 

107,273

 

Income before the following

 

37,329

 

 

20,614

 

 

65,961

 

 

38,767

 

Depreciation and amortization

 

17,178

 

 

7,898

 

 

31,657

 

 

14,386

 

Finance expense, net

 

3,094

 

 

1,727

 

 

4,912

 

 

4,147

 

Special charges

 

5,559

 

 

5,354

 

 

11,280

 

 

8,405

 

Share-based compensation expense

 

1,685

 

 

-

 

 

2,897

 

 

-

 

Other (income) expenses

 

(3,265

)

 

1,913

 

 

3,138

 

 

3,006

 

Income before income taxes

 

13,078

 

 

3,722

 

 

12,077

 

 

8,823

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

1,400

 

 

2,697

 

 

2,807

 

 

4,133

 

 

 

 

 

 

 

 

 

 

Net income

$

11,678

 

$

1,025

 

$

9,270

 

$

4,690

 

Net income (loss) attributable to:

 

 

 

 

 

 

 

 

Shareholders of Converge

 

12,017

 

 

1,025

 

 

10,223

 

 

4,690

 

Non-controlling interest

 

(339

)

 

-

 

 

(953

)

 

-

 

 

$

11,678

 

$

1,025

 

$

9,270

 

$

4,690

 

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

Exchange differences on translation of foreign operations

 

5,883

 

 

820

 

 

(1,034

)

 

618

 

Comprehensive income

$

17,561

 

$

1,845

 

$

8,236

 

$

5,308

 

Comprehensive income (loss) attributable to:

 

 

 

 

 

 

 

 

Shareholders of Converge

 

17,900

 

 

1,845

 

 

9,189

 

 

5,308

 

Non-controlling interest

 

(339

)

 

-

 

 

(953

)

 

-

 

 

$

17,561

 

 

1,845

 

 

8,236

 

 

5,308

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA2

$

39,188

 

$

21,720

 

$

68,837

 

$

40,488

 

Adjusted EBITDA as a % of Net Revenue3

 

6.6

%

 

6.3

%

 

6.0

%

 

6.2

%

Adjusted EBITDA as a % of Gross Profit4

 

29.4

%

 

27.8

%

 

28.4

%

 

27.7

%

___________________________________
2
Non-IFRS measure. See “Adjusted EBITDA” under the Non-IFRS Financial Measures section of this news release.
3 Non-IFRS measure. See “Adjusted EBITDA as a % of Net Revenue” under the Non-IFRS Financial Measures section of this news release.
4 Non-IFRS measure. See “Adjusted EBITDA as a % of Gross Profit” under the Non-IFRS Financial Measures section of this news release.


Summary of Consolidated Statements of Cash Flows
(expressed in thousands of Canadian dollars)

 

 

For the three months ended June 30,

 

For the six months ended June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

 

 

 

 

 

 

 

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net income

$

11,678

 

$

1,025

 

 

9,270

 

$

4,690

 

Adjustments to reconcile net income to net cash from operating activities

 

 

 

 

 

 

 

 

Depreciation and amortization

 

18,739

 

 

9,070

 

 

33,969

 

 

16,311

 

Unrealized foreign exchange losses (gains)

 

(2,968

)

 

1,954

 

 

3,701

 

 

2,966

 

Share-based compensation expense

 

1,685

 

 

-

 

 

2,897

 

 

-

 

Finance expense, net

 

3,094

 

 

1,727

 

 

4,912

 

 

4,147

 

Change in fair value of contingent consideration

 

-

 

 

-

 

 

-

 

 

597

 

Income tax expense

 

1,400

 

 

2,697

 

 

2,807

 

 

4,133

 

 

 

33,628

 

 

16,473

 

 

57,556

 

 

32,844

 

Changes in non-cash working capital items

 

 

 

 

 

 

 

 

Trade and other receivables

 

(48,366

)

 

36,224

 

 

(76,139

)

 

59,019

 

Inventories

 

4,709

 

 

(12,019

)

 

11,258

 

 

(24,187

)

Prepaid expenses and other assets

 

(3,186

)

 

264

 

 

(4,615

)

 

(301

)

Trade and other payables

 

45,753

 

 

(30,462

)

 

16,370

 

 

(65,601

)

Income taxes payable

 

(16,272

)

 

(2,474

)

 

(17,025

)

 

(1,979

)

Other financial liabilities

 

319

 

 

1,871

 

 

2,236

 

 

1,871

 

Deferred revenue and customer deposits

 

9,985

 

 

13,833

 

 

6,600

 

 

17,513

 

Cash from (used in) operating activities

 

26,570

 

 

23,710

 

 

(3,759

)

 

19,179

 

 

 

 

 

 

 

 

 

 

Cash flows used in investing activities

 

 

 

 

 

 

 

 

Purchase of property and equipment

 

(3,123

)

 

(1,111

)

 

(14,479

)

 

(2,851

)

Proceeds on disposal of property and equipment

 

-

 

 

43

 

 

178

 

 

131

 

Repayment of contingent consideration

 

-

 

 

(2,134

)

 

(10,168

)

 

(5,502

)

Repayment of deferred consideration

 

(5,208

)

 

(624

)

 

(6,948

)

 

(3,748

)

Business combinations, net of cash acquired

 

(131,545

)

 

(85,956

)

 

(199,471

)

 

(96,150

)

Cash used in investing activities

 

(139,876

)

 

(89,782

)

 

(230,888

)

 

(108,120

)

 

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

Transfers to (from) restricted cash

 

58,980

 

 

49,671

 

 

(4,513

)

 

-

 

Interest paid

 

(2,102

)

 

(2,619

)

 

(3,058

)

 

(5,078

)

Dividend paid

 

(1,100

)

 

-

 

 

(1,100

)

 

-

 

Payments of lease liabilities

 

(2,304

)

 

(2,133

)

 

(5,032

)

 

(4,417

)

Net proceeds from issuance of common shares and warrants

 

-

 

 

164,482

 

 

-

 

 

245,422

 

Repayment of notes payable

 

(38

)

 

(642

)

 

(159

)

 

(3,414

)

Net proceeds from (repayment of) borrowings

 

22,351

 

 

(87,791

)

 

184,819

 

 

(83,549

)

Cash from financing activities

 

75,787

 

 

120,968

 

 

170,957

 

 

148,964

 

 

 

 

 

 

 

 

 

 

Net change in cash during the period

 

(37,519

)

 

54,896

 

 

(63,690

)

 

60,023

 

Effect of foreign exchange on cash

 

4,526

 

 

1,595

 

 

(328

)

 

133

 

Cash, beginning of period

 

217,168

 

 

68,432

 

 

248,193

 

 

64,767

 

Cash, end of period

$

184,175

 

$

124,923

 

$

184,175

 

$

124,923

 

Non-IFRS Financial Measures

This news release refers to certain performance indicators including “Adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA)”, “Adjusted Free Cash Flow”, “Adjusted Free Cash Flow Conversion”, “Adjusted Net Income ” and “Adjusted Earnings per Share”, “Gross Revenue”, and “Organic Growth” which are not recognized under IFRS and do not have any standardized meaning prescribed by IFRS. Converge’s method of calculating such non-IFRS measures and ratios may differ from methods used by other companies and therefore may not be comparable to similar measures presented by other companies. Management believes that these measures are useful to most shareholders, creditors, and other stakeholders in analyzing the Company’s operating results, and can highlight trends in its core business that may not otherwise be apparent when relying solely on IFRS financial measures. The Company also 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 and ratios 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. These non-IFRS financial measures and ratios are furnished to provide additional information and should not be considered in isolation or as an alternative to the consolidated income (loss) or any other measure of performance under 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 ratios and view them in conjunction with the most comparable IFRS financial measures.

Adjusted EBITDA

Adjusted EBITDA represents net income (loss) or income adjusted to exclude amortization, depreciation, interest expense and finance costs, foreign exchange gains and losses, share-based compensation expense, 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.

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.

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

 

For the three months
ended June 30,

For the six months
ended June 30,

 

 

2022

 

 

2021

 

2022

 

2021

Net income before taxes

$

13,078

 

$

3,722

$

12,077

$

8,823

Finance expense

 

3,094

 

 

1,727

 

4,912

 

4,148

Share-based compensation expense

 

1,685

 

 

-

 

2,897

 

-

Depreciation and amortization

 

17,178

 

 

7,898

 

31,657

 

14,386

Depreciation included in cost of sales

 

1,561

 

 

1,065

 

2,312

 

1,760

Foreign exchange loss (gain)

 

(2,967

)

 

1,954

 

3,702

 

2,966

Special charges

 

5,559

 

 

5,354

 

11,280

 

8,405

Adjusted EBITDA

$

39,188

 

$

21,720

$

68,837

$

40,488

Adjusted Free Cash Flow and Adjusted Free Cash Flow Conversion

The Company calculates Adjusted Free Cash Flow as Adjusted EBITDA less: (i) recurring capital expenditures (“Recurring Capex”) and (ii) lease payments relating to the IFRS 16 lease liability (“IFRS 16 Lease Liability”). Management defines Recurring Capex as the actual capital expenditures which are required to maintain the Company’s existing and ongoing operations in its normal course of business. Recurring Capex excludes one-time expenditures to support growth initiatives that the Company categorizes as non-recurring in nature. Adjusted Free Cash Flow is a useful measure that allows the Company to primarily identify how much pre-tax cash is available for continued investment in the business and for the Company’s growth by acquisition strategy.

Management also believes that Adjusted EBITDA is a good proxy for cash generation and as such, Adjusted Free Cash Flow Conversion is a useful metric that demonstrates that the rate at which the Company can convert Adjusted EBITDA to cash.

The following table provides a calculation for Adjusted Cash Flow and Adjusted Cash Flow Conversion:

 

For the three months
ended June 30,

For the six months
ended June 30,

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Adjusted EBITDA

$

39,188

 

$

21,720

 

$

68,837

 

$

40,488

 

 

 

 

 

 

Capex

 

(3,123

)

 

(1,111

)

 

(5,857

)

 

(2,851

)

Payment of lease liabilities

 

(2,304

)

 

(2,133

)

 

(5,032

)

 

(4,417

)

Adjusted Free Cash Flow

$

33,761

 

$

18,476

 

$

57,948

 

$

33,220

 

Adjusted Free Cash Flow Conversion

 

86

%

 

85

%

 

84

%

 

82

%

Adjusted EBITDA as a % of Net Revenue

The Company believes that Adjusted EBITDA as a % of Net Revenue is a useful measure of the Company’s operating efficiency and profitability. This is calculated by dividing Adjusted EBITDA by net revenue.

Adjusted EBITDA as a % of Gross Profit

The Company believes that Adjusted EBITDA as a % of Gross Profit is a useful measure of the Company’s operating efficiency and profitability. This is calculated by dividing Adjusted EBITDA by gross profit.

Adjusted Net Income and Adjusted Earnings per Share (“EPS”)

Adjusted Net Income represents net income adjusted to exclude special charges, amortization of acquired intangible assets, and share-based compensation. The Company believes that Adjusted Net Income is a more useful measure than net income as it excludes the impact of one-time, non-cash and/or non-recurring items that are not reflective of Converge’s underlying business performance. Adjusted EPS is calculated by dividing Adjusted Net Income by the total weighted average shares outstanding on a basic and diluted basis.

The Company has provided a reconciliation to the most comparable IFRS financial measure as follows:

 

For the three months

For the six months

ended June 30,

ended June 30,

 

 

2022

 

 

2021

 

2022

 

2021

Net income

$

11,678

 

$

1,025

$

9,270

$

4,691

Special charges

 

5,559

 

 

5,354

 

11,281

 

8,405

Amortization of acquired intangible assets

 

13,946

 

 

5,815

 

25,262

 

10,102

Foreign exchange (gain) loss

 

(2,968

)

 

1,954

 

3,700

 

2,966

Share-based compensation

 

1,685

 

 

-

 

2,897

 

-

Adjusted Net Income:

$

29,900

 

$

14,148

$

52,410

$

26,164

Basic

 

0.14

 

 

0.08

 

0.24

 

0.16

Diluted

 

0.14

 

 

0.08

 

0.24

 

0.15

Gross revenue and Gross revenue for organic growth

Gross revenue, which is a non-IFRS measurement, reflects the gross amount billed to customers, adjusted for amounts deferred or accrued. The Company believes gross revenue is a useful alternative financial metric to net revenue, the IFRS measure, as it better reflects volume fluctuations as compared to net revenue. Under the applicable IFRS 15 ‘principal vs agent’ guidance, the principal records revenue on a gross basis and the agent records commission on a net basis. In transactions where Converge is acting as an agent between the customer and the vendor, net revenue is calculated by reducing gross revenue by the cost of sale amount. Gross revenue for organic growth is calculated as i) the actual gross revenue for companies owned by Converge for at least three months that is included in the Company’s financial results for the year then ended, plus ii) for those acquisitions that occurred after January 1 and that have been under Converge ownership for at least three months, the pro forma gross revenue contribution had they been owned for the full fiscal year.

The Company has provided a reconciliation of gross revenue to net revenue, which is the most comparable IFRS financial measure, as follows:

 

For the three months

For the six months

ended June 30,

ended June 30,

 

 

2022

 

2021

 

2022

 

2021

Product

$

491,821

$

281,287

$

945,210

$

533,794

Managed services

 

32,268

 

17,990

 

66,251

 

38,420

Third party and professional services

 

205,589

 

152,843

 

392,146

 

288,006

Total

$

729,678

$

452,120

$

1,403,607

$

860,220

Adjustment for sales transacted as agent

 

133,022

 

106,813

 

256,914

 

204,711

Net revenue

$

596,656

$

345,307

$

1,146,693

$

655,509

The Company measures organic growth on an annual basis, at the gross revenue level, and includes companies that Converge has owned for at least three months. Once a company is acquired, there is lead time required to integrate and regionalize the acquired work force, align rebate programs, and begin to execute on cross-selling opportunities. Management believes that three months provides a good representation of the acquisition under Converge ownership and can begin to evaluate the acquired company from an organic growth standpoint. Organic growth is calculated by deducting prior year pro forma gross revenues from current year gross revenue for organic growth. Organic growth % is calculated by dividing organic growth by prior year pro forma gross revenues, as follows:

The following table calculates organic growth for Q2-2022:

 

Q2
(3-month)

 

Gross revenue

$

729,678

 

Less: gross revenues of Companies below three months ownership

 

34,913

 

Gross revenue included in actual results

 

694,765

 

Add: pro forma gross revenue

 

-

 

Gross revenue for organic growth

 

694,765

 

Prior period pro forma gross revenues

 

640,091

 

Organic Growth - $

$

54,674

 

Organic Growth - %

 

8.5

%

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 the Company considers 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 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.