Communicators

Converge Technology Solutions Reports Fourth Quarter and Fiscal Year 2018 Financial Results

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

March 28, 2019 – Vancouver (British Columbia) and Toronto (Ontario)– Converge Technology Solutions Corp. (“Converge” or “Company”) (TSXV:CTS) (FSE:0ZB), a Hybrid IT solutions provider (“ITSP”), is pleased to provide its financial results for the three and twelve months ended December 31, 2018.  All figures are in CAD dollars unless otherwise stated.

“We are very pleased with the results from our first full year of operations, having successfully completed phase one of our long-term growth strategy,” stated Shaun Maine, Chief Executive Officer of Converge. “With five transactions completed over the course of 2018, each covering its own segment of the ITSP market, we ended the year with revenue of $459 million and Adjusted EBITDA1 $16.5 million. In the fourth quarter, we achieved revenue of $136.1 million and gross margin of 22.3% with Adjusted EBITDA1 of $5.8 million.  We remain committed to our strategy of accretive acquisitions while remaining profitable. As well, we continue to see an increase in spend from our clients in both managed services and our public cloud offerings, which are both critical components of our strategy.”

Mr. Maine continued, “As we look ahead to 2019, after having completed our January 2019 acquisition of Software Information Systems, we are extremely excited to realize the benefits of our cross-selling strategy among Converge companies, having already seen significant opportunities arise on this front. Furthermore, our backlog of acquisitions remains strong while we maintain our strategy of both organic growth and growth through strategic acquisitions.”

Fiscal Year 2018 Financial Highlights

Fiscal year 2018 was the Company’s first full year of operations. Accordingly, there is no comparable period analysis for fiscal year 2018.

-          Revenue for the twelve months ended December 31, 2018 was $459.2 million.

-          Gross profit for the twelve months ended December 31, 2018 was $90.0 million or 19.6%.

-          Adjusted EBITDA1 for the twelve months ended December 31, 2018 was $16.5 million.

1  EBITDA and Adjusted EBITDA are non-IFRS financial measures and do not have any standardized meaning under IFRS. See “Use of Non-IFRS Financial Measures” below.

Fourth Quarter Financial Highlights

-          Revenue was $136.1 million for the three months ended December 31, 2018, compared to revenue of $52.8 million for the same period in 2017, an increase of 158%. The increase is primarily attributable to five transactions completed by the Company in 2018.

-          Gross profit for the three months ended December 31, 2018 was $30.3 million or 22.3% compared to $10.7 million or 20.2% for the three months ended December 31, 2017. 

-          Adjusted EBITDA1 was $5.8 million for the three months ended December 31, 2018, compared to Adjusted EBITDA1 loss of $0.3 million for the three months ended December 31, 2017.

1          EBITDA and Adjusted EBITDA are non-IFRS financial measures and do not have any standardized meaning under IFRS. See “Use of Non-IFRS Financial Measures” below.

Key Items from the Fourth Quarter

-          Converge entered a service agreement with Essex Technology Group, Inc. (“Essextec”) for the provision of strategic and operational advice and functions. In addition, the Company loaned the ultimate parent of Essextec $5.25 million in the form of a demand promissory note at a rate of 10%. The Company’s loan was financed by an investment from a strategic partner in the form of a convertible debenture with an 8% coupon and conversion price of $1.00.  

-          Converge announced that it had acquired Lighthouse Computer Services, a top partner in the IBM ecosystem and one of the 12 companies in Red Hat’s Application Partner Program.

-          Becker-Carroll, a Converge company, was awarded a contract to provide facilitation, project management and lead editorial services in the advancement of the Pan-Canadian Trust Framework.

Key Items Subsequent to Quarter End

-          The Company acquired Software Information Systems, LLC (“SIS”) for USD $11.5 million in cash plus the issuance of a right for the vendors of SIS to exchange specific membership units in SIS for an aggregate of 8,000,000 common shares of Converge over a three-year period.

-          Northern Micro, a Converge company, was announced as a qualified supplier of artificial intelligence solutions to the Government of Canada.

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.

Date: Friday, March 29th, 2019

Time: 9:00 AM Eastern Time

Participant Dial-in Numbers:

Local – Toronto (+1) 416 764 8609

Toll Free – North America (+1) 888 390 0605

Conference ID: 51999150

Recording Playback Numbers:

Toronto (+1) 416 764 8677

Toll Free – North America (+1) 888 390 0541

Passcode: 999150 #

Expiry Date: Friday, April 12th, 2019 at 11:59pm

Quarterly and Annual Results Materials

The Company’s outlook is contained in its MD&A for the three and twelve months ended December 31, 2018, which is available along with the 2018 audited consolidated financial statements, at www.convergetp.com and at www.sedar.com.

Summary of Consolidated Financial Results

(in thousands of dollars)

About Converge

Converge Technology Solutions Corp. combines innovation accelerators and foundational infrastructure solutions to deliver best-of-breed solutions and services to customers. The Company is building a platform of regionally-focused Hybrid IT solution providers to enhance their ability to provide multi-cloud solutions, blockchain, resiliency, and managed services, enabling Converge to address the business and IT issues that public and private-sector organizations face today.

For further information contact:

Mary Anne Palangio

Chief Financial Officer

Converge Technology Solutions Corp.

investors@convergetp.com

(416) 360-1495

Virtus Advisory Group

Shareholder Inquiries

Email:  converge@virtusadvisory.com

Phone:  416-644-5081

Notice to Reader:  Use of Non-IFRS Financial Measures and Forward-Looking Statements

1. Non-IFRS Financial Measures

In this news release, management uses certain non-IFRS measures to evaluate the performance of the Company.  The term “Adjusted EBITDA” does not have any standardized meaning prescribed within IFRS and therefore may not be comparable to similar measures presented by other companies.  Such measures should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS such as net income.  Adjusted EBITDA is defined as gross profit less selling, general and administrative expenses, and corresponds to income before income tax, depreciation and amortization, finance expenses, change in fair value of contingent consideration, transaction costs for acquisitions, initial public offering costs and other non-operating expenses.

Management believes Adjusted EBITDA is an important indicator as it excludes certain items that are non-cash expenses, items that cannot be influenced by management in the short term and items that do not impact core operating performance, demonstrating the Company’s ability to generate liquidity through operating cash flow to fund working capital needs, service outstanding debt and fund future capital expenditures.  Adjusted EBITDA is used by some investors and analysts for the purposes of valuing an issuer.  The intent of Adjusted EBITDA is to provide additional useful information to investors and analysts and is also used by management as an internal performance measurement. A reconciliation of Adjusted EBITDA to net income is contained in the MD&A (see “Non-IFRS Financial Measures”).

2. 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 filing statement dated April 1st, 2019 which is available on SEDAR under the Company’s profile at www.sedar.com in addition to the consolidated financial statements for theyears ended December 31, and 2017 together with the corresponding Management’s Discussion and Analysis for additional risk factors described under “Risk Management”.

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.