CARLSBAD, CA, Aug. 29, 2013 /CNW/ - Pivot Technology Solutions, Inc.
("Pivot" or the "Company") (TSX-V: PTG) today publishes its results for
the second quarter ended June 30, 2013.
Financial highlights Q2 2013
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Sequential revenue growth of 26.5% compared to Q1 2013.
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Year-over-year, revenue fell by 31.4% to $321.7 million.
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Gross margin improved to 11.5% from 8.0% for the same period last year
and down slightly from 11.8% from Q1 2013.
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Adjusted EBITDA* was $7.8 million, down 37.0% from the same quarter last
year and up 129.4% from Q1 2013.
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Consolidated net income for the period of $0.7 million, as compared to a
$4.3 million net loss for the same period in 2012 and a net loss of
$4.8 million for Q1 2013.
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A non-cash goodwill impairment charge of $11.0 million was recorded
related to the ACS acquisition.
Management commentary
Warren Barnes, CEO of Pivot, commented, "Our results improved compared
to the first quarter of this year. Our sequential growth was driven by
demand for storage and network related initiatives, improved
performance at Sigma, and continued penetration of existing customer
accounts. Compared to Q1, revenues from one of the Company's largest
customers have increased, although are not yet at levels prior to a new
platform technology product re-mapping that occurred in Q1 2013."
"Despite the year-over-year drop in revenues, improved customer mix and
an improved contribution from our services business, both at Sigma and
at ProSys, resulted in an improved gross margin, from 8.0% to 11.5%.
Sequentially, prudent expense management and increased revenue resulted
in our adjusted EBITDA more than doubling compared to Q1."
Kerri Brass, Pivot CFO, commented, "Year-over-year, the revenue
comparison continues to be affected by a large one time project for one
of ACS's largest customers, which was ongoing during the second quarter
of 2012. This volatility in revenue has impacted results at ACS these
past two quarters, and we recorded a non-cash goodwill impairment
charge in order to better reflect ACS's carrying value on our balance
sheet."
Mr. Barnes concluded, "A key element of my mandate since taking over as
CEO just under two months ago has been to accelerate the integration of
the acquired operating companies. We see opportunities to deliver top
and bottom line growth based on internal measures, and have therefore
launched a number of initiatives focused on sales, technology and
costs. We believe these areas will provide the greatest leverage."
Q2 2013 Financial Review
Revenues came in at $321.7 million, up 26.5%, or $67.4 million, from Q1
2013. Revenues were down 31.4%, or $14.4 million, from Q2 2012, which
included revenues at the Company's ACS business attributable to
large-scale data center builds by a significant customer. The Sigma
business, which was acquired in July of 2012, contributed $54.3 million
to revenues in Q2 2013, up 58.0% from Q1 2013.
Service revenues for the second quarter increased by $11.9 million, or
77.3%, over the same period in the prior year. These increases were
driven by the addition of Sigma, as well as by ProSys, who continued to
penetrate new accounts and provide additional higher margin service
offerings.
Gross profit was $37.0 million, up 23.9%, or $7.1 million, from Q1 2013,
and down marginally by 1.6%, or $0.6 million, from Q2 2012 due to the
effects of the significant Q2 2012 ACS projects, offset by the
acquisition of Sigma and continued penetration of existing customer
accounts. Gross profit margins increased to 11.5% in Q2 2013 from 8.0%
in Q2 2012, despite reductions in revenues and rebate programs from
some of the Company's major vendors. To counteract these reductions,
the Company continues to leverage the purchasing scale of the combined
operating businesses to maximize available rebates.
Adjusted EBITDA of $7.8 million was up 129.4%, or $4.4 million, from Q1
2013. Operating leverage through prudent expense management drove this
increase as business activity increased. Adjusted EBITDA was down
37.0%, or $4.6 million, from Q2 2012, mainly due to the effects of the
significant Q2 2012 ACS projects.
Selling and administrative expenses for Q2 2013 increased by $4.0
million, or 15.8%, compared to the same period last year. This was the
result of increased headcount through the addition of Sigma in July
2012, offset partially by lower variable commissions, and bonuses.
Interest expense was down $6.2 million from Q2 2012 as a result of the
conversion of debentures into Series A Preferred Shares at the end of
Q1. Series A preferred share dividends of $1.1 million were declared
during Q1 2013 and subsequently paid. The Company is considering
various alternatives with respect to the Series A Preferred Shares in
an effort to provide a measure of liquidity to its holders other than
conversion into common shares. No specific alternative has been
developed, but the expectation is that one will be in the near future.
Until the completion of its review of alternatives, the Company does
not intend to exercise its right to convert Series A Preferred Shares
into common shares.
The Company recorded an $11.0 million non-cash goodwill impairment
charge in relation to the ACS acquisition due to continued volatility
of the operating company's results. The impairment charge was offset
partially by a recovery of $10.0 million recorded in Q2 2013 in
relation to the change in fair value of contingent consideration
liabilities with respect to the acquisition of ACS. On a consolidated
basis, the Company recorded net income of $0.7 million.
Inherent to the Company's MVSP business model, normal changes in revenue
performance drive significant movements in working capital, in
particular with regards to accounts receivable, inventory and accounts
payable. As such, movements in working capital balances are strictly
volume related, and not a performance indicator of working capital
management.
Conference Call
Management will host a conference call on August 29, 2013 at 11:00 am
EDT.
Participant Dial-In Number(s):
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(888) 231-8191 or (647) 427-7450
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Access code:
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35988948
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A replay will be available for one week following the call via
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http://bit.ly/150tDXN
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Conference ID:
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35988948
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Alternatively, the call can be accessed through:
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Encore Toll Free Dial-in Number:
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(855) 859-2056
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Encore Password:
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35988948
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Subsequently, a recording of the call will be posted on the Company's
website: www.pivotts.com
About Pivot Technology Solutions, Inc.
Together with its portfolio companies and partners, Pivot delivers
solutions that enable organizations to design, build, implement and
maintain computing and communication infrastructure that addresses
their unique business needs. Pivot's approach supports improvement of
business performance, helps organizations reduce capital and operating
expenses, and accelerates the delivery of new products and services to
end-customers. With over 2,000 clients, many of whom are Fortune 1,000
companies, Pivot extends its value added solutions to help
organizations of all sizes improve operating efficiency, reduce
complexity and enhance service delivery through virtualization and
cloud computing. Pivot enables businesses to extend their enterprise
through mobility solutions to better connect business partners and
customers. Pivot has offices throughout North America and can be found
online at www.pivotts.com.
Forward Looking Statement
This news release contains statements that, to the extent they are not
recitations of historical fact, may constitute "forward-looking
statements" within the meaning of applicable Canadian securities laws.
Forward-looking statements include statements regarding Pivot's future
growth, initiatives or capitalization or the assumptions underlying any
of the foregoing. Pivot uses words such as "may", "would", "could",
"will", "likely", "expect", "believe", "intend" and similar expressions
to identify forward-looking statements. Any such forward-looking
statements are based on assumptions and analyses made by Pivot in light
of its experience and its perception of historical trends, current
conditions and expected future developments, including the assumption
that opportunities identified by Pivot may lead to revenue and income
growth, as well as other factors Pivot believes are appropriate under
the relevant circumstances. However, whether actual results and
developments will conform to Pivot's expectations and predictions is
subject to any number of risks, assumptions and uncertainties. Many
factors could cause Pivot's actual results, to differ materially from
those expressed or implied by the forward-looking statements contained
in this news release. These factors include, without limitation:
uncertainty in the global economic environment; fluctuations in
currency exchange rates; delays in the purchasing decisions of Pivot's
customers; the competition Pivot faces in its industry and/or
marketplace; shareholder support for changes to Pivot's capitalization;
and the possibility of technical, logistical or planning issues in
connection with the deployment of Pivot's products or services.
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.
Pivot Technology Solutions
SELECTED FINANCIAL INFORMATION
Full financial statements and related Management Discussion and Analysis
can be found on SEDAR and the Company's website www.pivotts.com
All figures are in US $ '000s, except Gross margin (in % of total
revenue).
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Three months ended
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Six months ended
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June 30
2013
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June 30
2012
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June 30
2013
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June 30
2012
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Revenue
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321,677
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469,081
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575,961
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747,814
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Gross profit
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37,026
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37,619
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66,907
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65,429
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Gross margin
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11.5%
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8.0%
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11.6%
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8.7%
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Selling and administrative
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29,205
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25,212
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55,677
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45,914
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Depreciation and amortization
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2,840
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2,423
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5,656
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4,842
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Interest expense
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1,479
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7,726
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4,040
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10,148
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Change in fair value of liabilities
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(9,428)
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4,470
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(9,812)
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9,668
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Goodwill impairment
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11,000
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-
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11,000
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Transaction costs
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-
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1,754
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166
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Other (income)/expense
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298
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(180)
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11
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(3)
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Total operating expenses
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35,394
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39,651
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68,326
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70,735
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Income (loss) before income taxes
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1,632
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(2,032)
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(1,419)
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(5,306)
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Adjusted EBITDA*
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7,821
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12,407
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11,230
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19,515
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Net comprehensive income (loss) for the period
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689
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(4,322)
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(4,126)
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(9,152)
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*Non-IFRS Financial Measures
The Company internally measures its performance and results of
initiatives through a number of measures that are not recognized under
IFRS and may not be comparable to similar measures used by other
companies.
Adjusted EBITDA
Adjusted EBITDA is a non-IFRS measure that management believes is a
useful measurement to evaluate the performance of the Company.
Investors should be cautioned, however, that Adjusted EBITDA should not
be construed as an alternative to net earnings as determined in
accordance with IFRS. The Company's method of calculating Adjusted
EBITDA may differ from the methods used by other companies and,
accordingly, it may not be comparable to similarly titled measures used
by other companies.
Adjusted EBITDA is defined as income (loss) before income taxes,
depreciation, amortization, transaction costs, interest expense, change
in fair value of liabilities, goodwill impairment and other
(income)/expense. Management believes it is useful to exclude these
items as they are either non-cash expenses, items that cannot be
influenced by Management in the short term, or items that do not impact
core operating performance, and Management uses this information
internally for forecasting and budgeting purposes.
The following provides a reconciliation of Adjusted EBITDA to income
before income taxes:
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Three months ended
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Six months ended
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June 30
2013
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June 30
2012
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June 30
2013
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June 30
2012
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Income (loss) before income taxes
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1,632
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(2,032)
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(1,419)
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(5,306)
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Adjustments
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Depreciation and amortization
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2,840
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2,423
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5,656
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4,842
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Interest expense
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1,479
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7,726
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4,040
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10,148
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Change in fair value of liabilities
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(9,428)
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4,470
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(9,812)
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9,668
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Goodwill impairment
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11,000
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-
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11,000
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-
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Transaction costs
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-
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-
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1,754
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166
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Other (income)/expense
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298
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(180)
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11
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(3)
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Adjusted EBITDA
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7,821
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12,407
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11,230
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19,515
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SOURCE: Pivot Technology Solutions, Inc.