Gross profit increases 14% and Adjusted EBITDA 20% driven by strong growth in Software & Cloud solutions
Softchoice revises 2022 outlook, announces Q3 dividend, and provides update on share buybacks
Softchoice Corporation (“Softchoice” or the “Company”) (TSX: SFTC) today announced its financial results for the quarter ended June 30, 2022 (“Q2 2022”). Softchoice will hold a conference call/webcast to discuss its results today, August 12, 2022, at 8:30 a.m. ET. Unless otherwise noted, all dollar ($) amounts are in U.S. dollars.
Selected Q2 2022 Financial Highlights
- Gross Sales increased by 15.7% to $583.1 million from $504.1 million in Q2 2021, driven by increases in Software & Cloud solutions. Net sales increased by 19.6% to $254.3 million from $212.7 million in Q2 2021 with growth in all solution types.
- Gross profit increased by 14.2% to $83.3 million, from $73.0 million in Q2 2021, driven by 15.7% growth in Software & Cloud solutions.
- Income from operations increased by $32.0 million to $18.4 million, from a loss of $13.6 million in Q2 2021. The increase was primarily driven by the reduction in non-recurring costs related to the IPO which were reflected in Q2 2021.
- Adjusted EBITDA increased by 19.8% to $25.0 million, from $20.9 million in Q2 2021, as gross profit increased by $10.3 million, which was partially offset by an increase in Adjusted Cash Operating Expenses of $6.2 million. The increase in Adjusted Cash Operating Expenses was driven by accelerated growth investments made over the past year and increases in certain variable compensation costs which are tied to gross profit performance.
- Net income increased by $20.9 million to $7.8 million from net loss of $13.1 million in Q2 2021. The increase was driven by the growth in income from operations, partially offset by an increase in net foreign exchange loss and income tax expense.
- Adjusted Net Income increased by 41.7% or $4.9 million to $16.7 million from $11.8 million in Q2 2021.
Selected Q2 2022 Business Highlights
- Account Executive (“AE”) headcount increased to 424 at June 30, 2022, already within the range of end-of-2022 AE target of 423 to 433 AEs.
- Customers grew to 4,667 at June 30, 2022, an increase of 29 versus December 31, 2021.
- Expanded board of directors of the Company (the “Board”) to eight directors, comprising seven incumbent directors and one new director, Sylvie Veilleux, elected by shareholders at the Company’s annual general meeting.
- Received Intel Canada Award of Innovation for expanding its customer value and capabilities across managed services and hybrid multi-cloud environments to help organizations accelerate their cloud adoption and meet their business priorities.
- Named as the 2022 VMware Partner of the Year, which is a global distinction awarded to a single partner each year as part of VMware’s annual Partner Achievement Awards. The Company was recognized by VMware for delivering the most customer value and impact to their organizations, creating on-prem to cloud and as-a-service opportunities.
- Named a Best Workplace™ in Canada by the Great Place to Work® Institute for the 17th straight year. Also recognized as a "Best Place to Work for LGBTQ Equality" in the Human Rights Campaign’s 2022 Corporate Equality Index, receiving a perfect score.
Commenting on Q2 2022 and the Company's 2022 outlook, Vince De Palma, Softchoice’s President & Chief Executive Officer, said:
“We recorded a healthy second quarter of organic growth driven by our Software & Cloud IT solutions, notably from public cloud consumption and workplace software sales. Demand has been resilient as organizations continued to prioritize IT investments to increase flexibility, agility and security, so that they can compete and win in their markets. We continued to drive higher customer retention and engagement, resulting in record revenue retention, and returned to growth in our customer base in Q2, driven by our expanded frontline salesforce.
“We are maintaining our top line gross profit growth outlook for 2022 as we continue to see robust demand. However, we have lowered our Adjusted EBITDA margin expectations for fiscal 2022. We outperformed in recruiting and retaining talent in high-growth areas of our business which, while beneficial over the long run, is a temporary drag on earnings in this fiscal year. We are also seeing modest impacts from wage inflation and are taking a more cautious view on the relative contribution to our gross profit from certain areas of our business, which carry a higher EBITDA margin. All things considered, our talent investments are positively impacting our customers and our business, and we are confident in our organization’s ongoing ability to drive sustained profitable growth.”
Please refer to the cautionary statements under “Forward-Looking Statements” of this press release.
Financial Summary1
US$ M except per share amounts and percentages
|
Q2 2022
|
Q2 2021
|
Growth %
|
H1 2022
|
H1 2021
|
Growth %
|
Gross Sales
|
583.1
|
504.1
|
15.7%
|
1,049.7
|
938.9
|
11.8%
|
Net sales
|
254.3
|
212.7
|
19.6%
|
477.2
|
445.9
|
7.0%
|
Gross profit
|
83.3
|
73.0
|
14.2%
|
150.4
|
136.0
|
10.6%
|
Adjusted EBITDA
|
25.0
|
20.9
|
19.8%
|
35.0
|
31.3
|
11.6%
|
as a Percentage of Gross Profit
|
30.0%
|
28.6%
|
|
23.2%
|
23.0%
|
|
Income from operations
|
18.4
|
(13.6)
|
NMF
|
22.2
|
(12.1)
|
NMF
|
Net income (loss)
|
7.8
|
(13.1)
|
NMF
|
11.5
|
(15.1)
|
NMF
|
Net income (loss) per Diluted Share
(attributable to the Owners of the Company)
|
$0.12
|
$(0.30)
|
NMF
|
$0.18
|
$(0.35)
|
NMF
|
Adjusted Net Income
|
16.7
|
11.8
|
41.7%
|
21.3
|
14.3
|
48.5%
|
Adjusted EPS (Diluted)
|
$0.27
|
$0.22
|
22.7%
|
$0.34
|
$0.28
|
21.4%
|
US$ M except per share amounts and percentages
|
Q2 2022
|
Q2 2021
|
Growth %
|
H1 2022
|
H1 2021
|
Growth %
|
Gross Sales by IT Solution Type*:
|
|
|
|
|
|
|
Software & Cloud
|
399.1
|
360.6
|
10.7%
|
698.1
|
631.3
|
10.6%
|
Services
|
31.3
|
26.5
|
18.2%
|
56.0
|
50.7
|
10.5%
|
Hardware
|
152.7
|
117.0
|
30.4%
|
295.6
|
257.0
|
15.0%
|
|
|
|
|
|
|
|
Gross Profit by IT Solution Type*:
|
|
|
|
|
|
|
Software & Cloud
|
54.1
|
46.8
|
15.7%
|
94.5
|
83.2
|
13.6%
|
as a percentage of Gross Sales
|
13.6%
|
13.0%
|
|
13.5%
|
13.2%
|
|
Services
|
8.3
|
6.9
|
19.8%
|
14.8
|
14.0
|
5.3%
|
as a percentage of Gross Sales
|
26.4%
|
26.1%
|
|
26.3%
|
27.6%
|
|
Hardware
|
20.9
|
19.3
|
8.4%
|
41.2
|
38.8
|
6.1%
|
as a percentage of Gross Sales
|
13.7%
|
16.5%
|
|
13.9%
|
15.1%
|
|
* Amounts may not add to total due to rounding
Financial Position
The Company ended Q2 2022 in strong financial condition, with approximately $200 million in available funds from cash on hand and through its $275 million revolving credit facility. Including internally generated cash flows, the Company anticipates having significant resources with which to pursue growth opportunities and enhance shareholder returns.
The Company had approximately $83.6 million in loans and borrowings outstanding at the end of Q2 2022. Net debt, equating to loans and borrowings plus lease liabilities less cash-on-hand, was $95.7 million at June 30, 2022. Net debt decreased from $108.4 million at March 31, 2022 due primarily to cash generated by operating activities in Q2 2022. The quarter end ratio of net debt to Adjusted EBITDA for the trailing twelve-months ended June 30, 2022 was 1.3x compared with 1.6x at March 31, 2022 and 1.2x at December 31, 2021.
Dividend
The Board has declared a quarterly cash dividend of C$0.09 per common share of the Company (each, a “Common Share”) for the period from July 1, 2022 to September 30, 2022, to be paid on October 14, 2022 to shareholders of record at the close of business on September 30, 2022. The Dividend to which this notice relates is an eligible dividend for tax purposes.
NCIB
On March 3, 2022, the Board approved the commencement of a normal course issuer bid (“NCIB”) through the facilities of the TSX and/or alternative Canadian trading systems to purchase and cancel up to 3,018,528 of the Company’s Common Shares, representing approximately 10% of the public float of 30,185,282, during the twelve-month period commencing on March 8, 2022 and ending March 7, 2023. During the three and six-month periods ended June 30, 2022, 695,426 Common Shares and 824,412 Common Shares, respectively were repurchased and cancelled under the NCIB.
In connection with the NCIB, the Company entered into an automatic purchase plan effective as of March 8, 2022 with a designated broker which allows for the purchase and cancellation of Common Shares, subject to certain trading parameters, by the Company’s designated broker during times when Softchoice would ordinarily not be active in the market due to applicable regulatory restrictions or self-imposed blackout periods. Outside of these periods, the Common Shares will be repurchased by the Company at our discretion under the NCIB.
Our Outlook 2
The following outlook supersedes all prior statements made by the Company and is based on current expectations.
The Company has revised its financial outlook for the fiscal year ending December 31, 2022 based on its results for the six months ended June 30, 2022. We are maintaining our gross profit growth outlook but reducing our Adjusted EBITDA margin outlook as a result of accelerated growth investments, including in advanced value services, public cloud capabilities, and sales capacity, along with cost pressure in pockets of our organization due to the inflationary environment. We are also taking a more cautious view on the relative contribution to gross profit from certain areas of our business which carry a higher EBITDA margin. See also “Forward-Looking Statements” below for further details on assumptions underlying our financial outlook.
Softchoice is revising its 2022 financial outlook as follows:
|
Current Fiscal 2022 Outlook
|
Prior Fiscal 2022 Outlook
|
Gross Profit
|
>$320 million
(>11.5% growth over Fiscal 2021)
|
>$320 million
(>11.5% growth over Fiscal 2021)
|
|
|
|
Adjusted EBITDA as a Percentage of Gross Profit
|
~25% to 28% margin
(Inclusive of ~$25 million of Project Monarch Uplift)
|
~30% margin
(Inclusive of ~$25 million of Project Monarch Uplift)
|
|
|
|
Adjusted Free Cash Flow Conversion
|
Approximately 90%
|
Approximately 90%
|
The outlook above constitutes forward-looking information within the meaning of applicable securities laws and is based on a number of assumptions and risks described under the heading “Forward-Looking Statements” of this press release. The Company’s outlook also constitutes "financial outlook" within the meaning of applicable securities laws and is provided for the purposes of assisting the reader in understanding the Company's financial performance and measuring progress toward management's objectives and the reader is cautioned that it may not be appropriate for other purposes.
Quarterly Conference Call
Softchoice’s management team will hold a conference call to discuss our second quarter 2022 results today at 8:30 a.m. (ET).
DATE: Friday, August 12, 2022
TIME: 8:30 a.m. Eastern Time
DIAL-IN: 416-764-8659 or 1-888-664-6392, Confirmation # 75636215
WEBCAST: https://produceredition.webcasts.com/starthere.jsp?ei=1556709&tp_key=f414f1961f
TAPED REPLAY: 416-764-8677 or 1-888-390-0541, Replay Code 636215 # (Available until August 19, 2022)
A link to the webcast will also be available on the Events page of the Investors section of Softchoice’s website at http://investors.softchoice.com. Please connect at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be required to join the webcast. An archived replay of the webcast will be available for 90 days.
Capitalized Terms
Capitalized terms used in this release, including Project Monarch, and terms we use to describe our IT solution types including Software & Cloud, Services, and Hardware and sales channels including SMB, Commercial, and Enterprise are described in the Company’s Management’s Discussion and Analysis of Financial Condition and Results of Operations for the three- and six-months ended June 30, 2022 (the “Q2 2022 MD&A”), and/or defined in our annual information form dated March 29, 2022 (the “AIF”) filed on SEDAR and available on the Company’s investor relations website http://investors.softchoice.com.
1 Non-IFRS Measures
This news release makes reference to certain non-IFRS measures and other measures. These measures are not recognized measures under International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing further understanding of our results of operations from management’s perspective. Accordingly, these measures should not be considered in isolation nor as a substitute for analysis of our financial information reported under IFRS. We use non-IFRS measures, including “Adjusted EBITDA”, “Adjusted EBITDA as a Percentage of Gross Profit”, “Adjusted Cash Operating Expenses”, “Adjusted Net Income (Loss)”, “Adjusted EPS”, “Adjusted Free Cash Flow Conversion”, and “Gross Sales”. These non-IFRS measures and other measures are used to provide investors with supplemental measures of our operating performance and thus highlight trends in our core business that may not otherwise be apparent when relying solely on IFRS measures. Our management uses these non-IFRS measures and other measures in order to facilitate operating performance comparisons from period to period, to prepare annual operating budgets and forecasts and to determine components of management compensation. We also believe that securities analysts, investors and other interested parties frequently use certain of these non-IFRS measures and other measures in the evaluation of issuers. As required by Canadian securities laws, we reconcile the non-IFRS measures to the most comparable IFRS measures. For more information on non-IFRS measures and other measures, see the Q2 2022 MD&A filed on SEDAR and available on the Company’s investor relations website http://investors.softchoice.com
Reconciliations of Non-IFRS Financial Measures
(Information in thousands of U.S. dollars, unless otherwise stated)
|
Three Months Ended
|
|
Six Months Ended
|
|
|
|
|
June 30,
|
|
|
|
June 30,
|
|
Reconciliation of Net Sales to Gross Sales
|
2022
|
|
2021
|
|
2022
|
|
2021
|
|
Net sales
|
254,310
|
|
212,653
|
|
477,232
|
|
445,883
|
|
Net adjustment for sales transacted as agent
|
328,763
|
|
291,410
|
|
572,450
|
|
493,058
|
|
Gross Sales
|
583,073
|
|
504,063
|
|
1,049,682
|
|
938,941
|
|
Reconciliation of Operating Expenses to Adjusted Cash Operating Expenses
|
|
|
|
|
|
|
|
|
Operating expenses
|
64,930
|
|
86,576
|
|
128,156
|
|
148,064
|
|
Depreciation and amortization
|
(4,897
|
)
|
(5,393
|
)
|
(9,770
|
)
|
(10,716
|
)
|
Equity-settled share-based compensation and other costs (1)
|
(1,142
|
)
|
(25,872
|
)
|
(1,714
|
)
|
(28,682
|
)
|
Non-recurring compensation and other costs (2)
|
(2
|
)
|
(237
|
)
|
(22
|
)
|
(519
|
)
|
Business transformation non-recurring costs (3)
|
(337
|
)
|
(467
|
)
|
(898
|
)
|
(740
|
)
|
IPO related costs (4)
|
–
|
|
(2,504
|
)
|
–
|
|
(2,757
|
)
|
Non-recurring legal provision (5)
|
(235
|
)
|
–
|
|
(322
|
)
|
–
|
|
Adjusted Cash Operating Expenses
|
58,317
|
|
52,103
|
|
115,430
|
|
104,650
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Income from operations to Adjusted EBITDA
|
|
|
|
|
|
|
|
|
Income from operations
|
18,402
|
|
(13,593
|
)
|
22,241
|
|
(12,068
|
)
|
Depreciation and amortization
|
4,897
|
|
5,393
|
|
9,770
|
|
10,716
|
|
Equity-settled share-based compensation and other costs (1)
|
1,142
|
|
25,872
|
|
1,714
|
|
28,682
|
|
Non-recurring compensation and other costs (2)
|
2
|
|
237
|
|
22
|
|
519
|
|
Business transformation non-recurring costs (3)
|
337
|
|
467
|
|
898
|
|
740
|
|
IPO related costs (4)
|
–
|
|
2,504
|
|
–
|
|
2,757
|
|
Non-recurring legal provision (5)
|
235
|
|
–
|
|
322
|
|
–
|
|
Adjusted EBITDA
|
25,015
|
|
20,880
|
|
34,967
|
|
31,346
|
|
Adjusted EBITDA as a Percentage of Gross Profit (6)
|
30.0
|
%
|
28.6
|
%
|
23.2
|
%
|
23.0
|
%
|
|
|
|
|
|
|
|
|
|
Reconciliation of Net Income (Loss) to Adjusted Net Income
|
|
|
|
|
|
|
|
|
Net income (loss)
|
7,788
|
|
(13,113
|
)
|
11,517
|
|
(15,110
|
)
|
Amortization of intangible assets
|
3,230
|
|
3,279
|
|
6,438
|
|
6,498
|
|
Equity-settled share-based compensation and other costs (1)
|
1,142
|
|
25,872
|
|
1,714
|
|
28,682
|
|
Non-recurring compensation and other costs (2)
|
2
|
|
237
|
|
22
|
|
519
|
|
Business transformation non-recurring costs (3)
|
337
|
|
467
|
|
898
|
|
740
|
|
IPO related costs (4)
|
–
|
|
2,504
|
|
–
|
|
2,757
|
|
Non-recurring legal provision (5)
|
235
|
|
–
|
|
322
|
|
–
|
|
Related party debt interest (7)
|
–
|
|
721
|
|
–
|
|
1,736
|
|
Subordinated debt interest (7)
|
–
|
|
183
|
|
–
|
|
446
|
|
Interest expense on accretion of non-interest-bearing notes (8)
|
–
|
|
–
|
|
–
|
|
120
|
|
Extinguishment of deferred financing fees (9)
|
–
|
|
1,621
|
|
–
|
|
1,621
|
|
Unrecoverable withholding taxes (10)
|
–
|
|
1,035
|
|
–
|
|
1,035
|
|
Gain on lease modification (11)
|
–
|
|
–
|
|
(209
|
)
|
–
|
|
Foreign exchange loss (gain) (12)
|
5,862
|
|
(3,844
|
)
|
3,208
|
|
(5,726
|
)
|
Tax recovery on deferred tax liability (13)
|
–
|
|
(2,863
|
)
|
–
|
|
(2,863
|
)
|
Related tax effects (14)
|
(1,931
|
)
|
(4,340
|
)
|
(2,606
|
)
|
(6,106
|
)
|
Adjusted Net Income
|
16,665
|
|
11,759
|
|
21,304
|
|
14,349
|
|
Weighted Average Number of Shares (Basic)
|
59,186,978
|
|
49,588,217
|
|
59,348,710
|
|
47,450,345
|
|
Weighted Average Number of Shares (Diluted)
|
62,850,758
|
|
53,879,978
|
|
63,012,490
|
|
51,742,105
|
|
Adjusted EPS (Basic) (15)
|
0.28
|
|
0.24
|
|
0.36
|
|
0.30
|
|
Adjusted EPS (Diluted) (15)
|
0.27
|
|
0.22
|
|
0.34
|
|
0.28
|
|
Reconciliation of Net Cash Provided by Operating Activities to
Adjusted Free Cash Flow
|
|
Trailing Twelve-Months Ended June 30,
|
|
|
2022
|
|
2021
|
|
Net cash provided by operating activities (16)
|
|
28,736
|
|
17,581
|
|
Adjusted for:
|
|
|
|
|
Share-based compensation and other costs (17)
|
|
8,410
|
|
28,405
|
|
Non-recurring compensation and other costs (2)
|
|
191
|
|
2,596
|
|
Business transformation non-recurring costs (3)
|
|
1,731
|
|
7,776
|
|
IPO related costs (4)
|
|
314
|
|
2,757
|
|
Follow-On Offering costs (18)
|
|
287
|
|
–
|
|
Non-recurring legal provision (5)
|
|
2,036
|
|
–
|
|
Realized foreign exchange loss (gain)
|
|
3,796
|
|
(10,077
|
)
|
Finance and other (income) expense (19)
|
|
(282
|
)
|
1,019
|
|
Cash taxes paid, net
|
|
9,831
|
|
6,171
|
|
Cash interest paid
|
|
4,856
|
|
7,577
|
|
Change in non-cash operating working capital (16)
|
|
12,800
|
|
6,644
|
|
Adjusted EBITDA
|
|
72,706
|
|
70,449
|
|
Maintenance Capex
|
|
(2,016
|
)
|
(331
|
)
|
IFRS 16 lease payments (20)
|
|
(6,791
|
)
|
(7,041
|
)
|
Adjusted Free Cash Flow
|
|
63,899
|
|
63,077
|
|
Adjusted Free Cash Flow Conversion
|
|
88
|
%
|
90
|
%
|
|
|
|
|
|
Notes (Refer to the Q2 2022 MD&A for description of the sections with parentheses within these Notes)
(1)
|
|
These expenses represent costs recognized in connection with the Company’s legacy option plan and omnibus long-term equity incentive plan, pursuant to which options granted are fair valued at the time of grant using the Black-Scholes option pricing model and adjusted for any plan modifications, and expenses related to RSUs and DSUs (as defined below). Other costs relate to the employee investment plan and the long-term profit-sharing plan, which were dissolved upon the completion of the IPO, and fair value adjustments in relation to existing equity-based arrangements. See “Share Information Prior to the Completion of the Offering”.
|
(2)
|
|
These expenses include compensation costs relating to severance and other costs comprised of professional, legal, consulting, accounting and management fees that are non-recurring and are sporadic in nature as they primarily relate to costs incurred in connection with shareholder distributions.
|
(3)
|
|
These costs in Fiscal 2021 relate to the implementation of Project Monarch, which were largely comprised of one-time third-party consulting expenses, personnel costs for dedicated internal resources and software related costs. All costs relating to Project Monarch were segregated for tracking purposes and are monitored on a regular basis. The costs in YTD 2022 relate to system enhancements after the implementation of Project Monarch. As at June 30, 2022, $50.1 million has been invested in operating and capital expenditures for Project Monarch and related system enhancements. See “Summary of Factors Affecting Performance – Business Transformation (Project Monarch)”.
|
(4)
|
|
In connection with the IPO, the Company incurred expenses related to professional fees, legal, consulting, accounting and compensation that would otherwise not have been incurred and therefore are non-recurring. These costs have been separately identified and adjusted for clarity. There were $253 of IPO related costs which were incurred in Q1 2021 that were previously classified under non-recurring compensation and other costs; these costs have been reclassified into IPO related costs for the six months period ended June 30, 2021.
|
(5)
|
|
The Company has settled certain legal claims, without admission of liability or wrongdoing, in respect of U.S. wage and hour disputes and has incurred $2.0 million in expenses for such settlements, which are non-recurring in nature. These legal claims were settled in Q2 2022.
|
(6)
|
|
Adjusted EBITDA as a Percentage of Gross Profit is calculated as Adjusted EBITDA divided by gross profit. See “Non-IFRS Measures and Other Measures – Non-IFRS Measures – Adjusted EBITDA and Adjusted EBITDA as a Percentage of Gross Profit”.
|
(7)
|
|
Related party and subordinated debt interest was settled at the time of Offering. For additional details see “Related Party Transactions”, “Subordinated Debt Information” and “Share Information Prior to the Completion of the Offering”.
|
(8)
|
|
This represents the expense relating to the accretion of the present value of the non-interest-bearing notes recognized over the term of the notes. These notes were settled at the time of Offering. See also “Related Party Transactions”, “Subordinated Debt Information” and “Share Information Prior to the Completion of the Offering”.
|
(9)
|
|
As a result of the refinancing, the unamortized balance of the deferred financing fees on the former revolving credit facility and term credit facility of $1,621 were extinguished.
|
(10)
|
|
Non-controlling interest portion of unrecoverable withholding taxes on royalties. Non-controlling interest was eliminated upon the IPO of the Company.
|
(11)
|
|
Gain on lease modification recognized in Q1 2022 as a result the derecognition of the lease liabilities related to rental parking as the associated office space has been subleased.
|
(12)
|
|
Foreign exchange (gain) loss includes both realized and unrealized amounts.
|
(13)
|
|
Decrease of deferred tax liability recorded on undistributed earnings from foreign jurisdiction due to change of tax rate applicable as the Company status changed from Canadian Controlled Private Company to public company.
|
(14)
|
|
This relates to the tax effects of the adjusting items, which was calculated by applying the statutory tax rate of 26.5% and adjusting for any permanent differences and capital losses. The comparative period has been reclassified due to a change in tax impact on adjusted items.
|
(15)
|
|
Basic Adjusted EPS is calculated using the weighted average number of shares outstanding during the period. Diluted Adjusted EPS includes the dilutive impact of the stock options in addition to the weighted average number of shares outstanding during the period. See “Non-IFRS Measures and Other Measures – Non-IFRS Measures – Adjusted Net Income (Loss) and Adjusted EPS”.
|
(16)
|
|
The TTM figures include adjusted figures for reclassification of costs between net cash provided by operating activities and change in non-cash operating working capital.
|
(17)
|
|
Share-based compensation represents costs recognized in connection with repurchases of stock options from terminated employees. Included in the trailing twelve months ended Q2 2021 and Q2 2022, there was $16.9 million relating to Cash-Out Agreements in conjunction with the IPO and $7.7 million relating to Cash-Out Agreements in conjunction with the Follow-On Offering, respectively. Other costs are comprised of the employee investment plan and the long-term profit-sharing plan, which were dissolved in connection with the IPO; and fair value adjustments in relation to existing equity-based arrangements. As a result of the IPO, a $6.1 million fair value adjustment was triggered on an existing equity-based arrangement which was dissolved thereafter. See “Share Information Prior to the Completion of the Offering”.
|
(18)
|
|
In connection with the Follow-On Offering, the Company incurred expenses related to professional fees, legal, and accounting fees that would otherwise not have been incurred and therefore are non-recurring. These costs have been separately identified and adjusted above.
|
(19)
|
|
Finance and other (income) expense refers to interest income on cash, net of non-controlling interest portion of unrecoverable withholding taxes on royalties.
|
(20)
|
|
Lease payments in the TTM Q2 2022 included a one-time early lease termination payment of $0.5 million, which occurred in Q3 2021.
|
2 Forward-Looking Statements
This news release contains “forward-looking information” within the meaning of applicable securities laws in Canada.
Forward-looking information may relate to our future business, financial outlook and anticipated events or results and may include information regarding our financial position, business strategy, growth strategies, addressable markets, budgets, operations, financial results, taxes, dividend policy, NCIB, business plans and objectives. Particularly, information regarding our expectations of future results, performance, achievements, prospects or opportunities or the markets in which we operate is forward-looking information. In some cases, forward-looking information can be identified by the use of forward-looking terminology such as “plans”, “targets”, “expects” or “does not expect”, “is expected”, “an opportunity exists”, “budget”, “scheduled”, “estimates”, “outlook”, “financial outlook”, “forecasts”, “projection”, “prospects”, “strategy”, “intends”, “anticipates”, “does not anticipate”, “believes”, or variations of such words and phrases or statements that certain actions, events or results “may”, “could”, “would”, “might”, “will”, “will be taken”, “occur” or “be achieved”. In addition, any statements that refer to expectations, intentions, projections or other characterizations of future events or circumstances contain forward-looking information. Statements containing forward-looking information are not historical facts but instead represent management’s expectations, estimates and projections regarding possible future events or circumstances.
Forward-looking information may include, among other things: (i) the Company’s expectations regarding its financial performance and outlook, including among others, net sales, gross profit, gross profit growth rates, expenses, Adjusted EBITDA, Adjusted EBITDA to Gross Profit margin, Adjusted Free Cash Flow Conversion, operations, the number of account executives and employees, organic growth and Adjusted EBITDA margin expansion; (ii) the Company’s expectations regarding industry and market trends, growth rates and growth strategies; (iii) the Company’s business plans and strategies; (iv) the Company’s ability to retain customers and increase margin per customer; (v) the Company’s relationship and status with technology partners; (vi) the Company’s growth strategies, future organic growth, and competitive position in the IT industry; (vii) the Company’s dividend program and dividend rates; (viii) the Company’s NCIB program and the purchase of Common Shares in connection with such programs; and (ix) the long-term impact of COVID-19 on our business, financial position, results of operations and/or cash flows; (x) M&A opportunities; and (xi) the materialization of the expected benefits of Project Monarch.
Forward-looking information is necessarily based on a number of opinions, estimates and assumptions that we considered appropriate and reasonable as at the date such statements are made, and are subject to known and unknown risks, uncertainties, assumptions and other factors that may cause the actual results, level of activity, performance or achievements to be materially different from those expressed or implied by such forward-looking information, including but not limited to the risk factors described in our Q2 2022 MD&A and under “Risk Factors” in the AIF. A copy of the AIF can be accessed under our profile on the System for Electronic Document Analysis and Retrieval (“SEDAR”) at www.sedar.com and on our website at investors.softchoice.com. There can be no assurance that such forward-looking information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, readers should not place undue reliance on forward-looking information, which speaks only as at the date made.
In addition to the forward-looking information cautions described above, the outlook set forth herein includes Gross Profit, Adjusted EBITDA as a Percentage of Gross Profit and Adjusted Free Cash Flow Conversion, in each case, for Fiscal 2022. Key underlying drivers for our forecast include: (i) the expected growth of our addressable market; (ii) the expected growth of our salesforce and improvements of our salesforce productivity; (iii) the expected growth in our customer base and wallet share amongst existing customers; and (iv) our view of the drivers of, and expectations related to, our anticipated growth as well as certain cost management measures and operational efficiencies we expect to realize. A significant portion of the increase in Gross Profit and Adjusted EBITDA for Fiscal 2022 is attributable to the procurement savings, pricing margin improvements, and business growth and reduced revenue leakage and expected net workforce efficiencies anticipated to result from Project Monarch. To the extent that these underlying drivers and benefits are not realized as expected, our Gross Profit, Adjusted EBITDA, Adjusted EBITDA as a Percentage of Gross Profit and, as a result, our Adjusted Free Cash Flow Conversion, during the relevant period will be adversely affected. The underlying assumptions relating to future results are inherently uncertain and are subject to significant business, economic, financial, regulatory, market and competitive risks, including risks that our initiatives or projects (including Project Monarch) do not result in the growth and increase in efficiencies anticipated, and could cause actual results to differ materially. If we do not achieve the anticipated results, we may modify or discontinue certain of our other planned business initiatives. In light of the foregoing, investors are urged to put these statements in context and not to place undue reliance on them.
About Softchoice
Softchoice (TSX: SFTC) is a software-focused IT solutions provider that equips organizations to be agile and innovative, and for their people to be engaged, connected and creative at work. That means moving them to the cloud, helping them build the workplace of tomorrow, and enabling them to make smarter decisions about their technology portfolio. For more information, please visit www.softchoice.com.
View source version on businesswire.com: https://www.businesswire.com/news/home/20220812005063/en/