CIBCThis is a flash report and they currently have a $31.00 target. GLTA
EQUITY RESEARCH
March 4, 2022 Flash Research
SOFTCHOICE CORPORATION
Q4/21 First Look: Solid, With 2022 Guidance Raised
Conclusion: Softchoice reported a solid Q4, with gross profit that was 13%
above consensus and adjusted EBITDA 12% above expectations. With Q4 results, the company increased its 2022 gross profit guidance from greater than $300 million to greater than $320 million. We will be looking for additional details on the margin expansion outlook, Project Monarch, the impact of supply chain disruption on the hardware business, and the
acquisition pipeline on the call at 8:30 a.m.
Key Highlights
Q4/21 Results: Softchoice reported gross profit of $85.8 million, roughly 13% above consensus ($76 million) and 14% above our estimate ($75.4 million). Q4 total gross profit was up 31% Y/Y. Software & Cloud gross profit of $53 million was up 42% Y/Y, Services gross profit of $7 million was up 70% Y/Y, and Hardware gross profit of $25 million was up 8%.
2022 Outlook Increased: Softchoice increased its 2022 financial outlook,
with the gross profit guidance increased to over $320 million versus a prior
guide of over $300 million (consensus $312 million). Adjusted EBITDA has
been revised from $90 million-$100 million to ~30% as a percentage of gross profit (implying over $96 million) versus consensus at $95 million. Adjusted free cash flow conversion of ~90% was unchanged.
EBITDA Growth: Adjusted EBITDA of $26.5 million was above consensus
($23.6 million) and our estimate ($23.9 million). Adjusted EBITDA margins
(as a percentage of gross profit) were 31%, slightly (30 bps) below
consensus expectations.
Annual Adjusted Free Cash Flow: The company’s press release included
annual adjusted free cash flow of $60 million for 2021, up from $58 million in the prior year. Adjusted FCF conversion was 87%, down from 88% a year ago. Softchoice’s adjusted FCF calculation is defined as adjusted EBITDA less maintenance capex and IFRS-16 lease payments.
Dividend Increased, NCIBC Commenced: Softchoice announced a 29%
increase in its quarterly dividend from $0.07 per share to $0.09 per share.
The company also announced that the board has approved the
commencement of an NCIB to buy back up to 3.02 million shares or ~10% of the public float.
Conference Call Details: Management will host a conference call to discuss results today at 8:30 a.m. ET. Dial-in: 888-664-6392 (passcode: 63207280)