Bullboard - Stock Discussion Forum Softchoice Corp T.SFTC

Alternate Symbol(s): SFTCF

Technology

Softchoice Corporation is a Canada-based software-focused information technology (IT) solutions provider. The Company designs, procures, implements, and manages complex multi-vendor IT solutions. Its solutions include Cloud and Data Center, Collaboration and Digital Workplace, IT Asset Management, Network, and Security. Its Cloud and Data Center solutions include data center modernization... see more

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Softchoice Corp > TD Reaction

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Post by retiredcf on Mar 04, 2022 12:10pm

TD Reaction

Softchoice Corp.

(SFTC-T) C$21.60

Q4/F21 Conference Call Highlights

Event

Softchoice's Q4/F21 conference call just ended.

Impact: SLIGHTLY POSITIVE

Below are key highlights from the conference call:

F2022 outlook is better-than-expected. Management indicated that it changed its approach to the Adj. EBITDA guidance from providing a range (previously $90mm to $100mm) to providing an expected minimum target (~30% margins or ~$96mm) with no high end to its guidance. Accordingly, with the new F2022 Adj. EBITDA guidance of ~$96mm should be compared to the bottom end of the prior guidance of $90mm, representing an ~7% increase.
Management has a high degree of confidence in its increased outlook. Due to ongoing strong customer demand, particularly for Software & Cloud solutions, and continued investments in its sales and technical teams and increasing productivity, management indicated that it had a high level of confidence in the improved guidance. It expects growth rates to improve as F2022 progresses with normal seasonality similar to F2021, with ~22% of F2022E gross profit and ~16% of F2022E Adj. EBITDA expected in Q1/F22.
Continuing to reinvest in the business to drive stronger growth. Management stated that incremental gross profit would be reinvested in the business to drive stronger growth (vs. driving higher margins). Although they did not provide a formal outlook beyond F2022, management highlighted that Adj. EBITDA has historically grown faster (21% CAGR from F2017-2019) than gross profit (10% CAGR from F2017-F2019), so we believe Adj. EBITDA margins are likely to improve in the coming years.
Capital allocation shifting away from reducing leverage. With net debt/Adj. EBITDA at a manageable 1.2x, its capital allocation priorities are on returning more capital to shareholders via its dividends and share buybacks with a lower emphasis on further reducing leverage. The company is also looking at opportunistic M&A opportunities as well as reinvesting for future (organic) growth.
On-track to hit AE hiring targets. Softchoice exited F2021 with just under 400 AEs and is on track to add ~40-50 AEs from F2020 levels (i.e., 423-432 AEs exiting F2022). Management indicated that it is not having trouble hiring new talent with retention rates being top quartile, however, it is seeing wage inflation (baked into guidance).