Converge Technology Solutions Corp.: Converge Technology Solutions Reports Third Quarter 2021 Financial Results

Company Reports Record Cashflow from Operations

TORONTO and GATINEAU, Québec, Nov. 10, 2021 (GLOBE NEWSWIRE) -- Converge Technology Solutions Corp. ("Converge" or "the Company") (TSX:CTS) (FSE:0ZB) (OTCQX:CTSDF) is pleased to provide its financial results for the three and nine months ended September 30, 2021. All figures are in Canadian dollars unless otherwise stated.

Q321 Highlights

• Third quarter revenue increased 93% over last year to $367.3 million
• Gross profit increased 60% over last year to $83.8 million
• Adjusted EBITDA increased 29% to $18.9 million from $14.6 million last year
• Record cashflow generated from operations of $48.1 million; an increase of 86% from $25.9 million compared to last year
• ARR from managed services increased by 34% to $81.1 million from $60.7 million last year
• Completed acquisition of REDNET AG, an IT service provider headquartered in Mainz, Germany marking the Company's official expansion into Europe
• Closed the previously announced acquisitions of Vicom Infinity, Inc. and Infinity Systems Software - two world class providers of IBM mainframe solutions and IBM software and services
• Announced as Ingram Micro's Blue Series Partner of the Year and CORE Partner of the Year for North America; Received Ingram Micro Cloud Reseller of the Year for the second consecutive year; Secured the 2021 North American Microsoft Surface Reseller of the Year; and Ranked fourteenth on CRN's 2021 Fast Growth 150 List
• Closed $259 million equity financing at $10.55 per common share in September 2021
• Added to the S&P/TSX Composite Index effective prior to market open on Monday, September 20, 2021

Subsequent to Quarter

• Completed the acquisition of LPA Software Solutions, a provider of business analytics and professional services in analytics, data science, artificial intelligence, financial performance management, data governance, data integration, location analytics, and data sets
• Announced a new Google Cloud Marketplace Solution allowing Converge to offer managed services to IBM and Google clients across North America and Europe
• Achieved AWS Migration Competency status recognizing the Company's ability to provide proven technology and expertise to help clients successfully move to AWS
• Closed a $35M non-brokered private placement to Converges' recently formed cybersecurity-focused SaaS entity, Portage CyberTech Inc.

"Converge continues to execute on all aspects of its strategy and we are extremely enthusiastic to have closed our platform acquisition in Europe. The Company continues to invest in talent and expand its service capabilities to its customers across North America and Europe, as reflected in our very impressive recurring revenue managed services growth," stated Shaun Maine, CEO of Converge. "Additionally, the Company ended the quarter with $210 million of cash on-hand driven by extremely strong free cash generation from our business, with $190 million in available capacity under our ABL credit facility."

Conference Call Details:

Date: Thursday, November 11^th, 2021
Time: 8:00 AM Eastern Time

Participant Dial-in Numbers:

Toll Free - North America ([phone]
Toll Free - International [phone]
Germany - 0800 181 5287
United Kingdom - 0800 028 8438
Conference ID: 1936798

Recording Playback Numbers:

Toll Free - [phone]
Alternative Number - [phone]
Passcode: 1936798
Expiry Date: November 18^th, 2021

A live audio webcast and archive of the conference call will be available by visiting the Company's website at https://convergetp.com/investor-relations/. Please connect at least 15 minutes prior to the conference call to ensure time for any software download that may be needed to hear the webcast.

About Converge
Converge Technology Solutions Corp. is a software-enabled IT & Cloud Solutions provider focused on delivering industry-leading solutions and services. Converge's regional sales and services organizations deliver advanced analytics, cloud, and cybersecurity offerings to clients across various industries. The Company supports these solutions with managed services, digital infrastructure, and talent expertise offerings across all major IT vendors in the marketplace. This multi-faceted approach enables Converge to address the unique business and technology requirements for all clients in the public and private sectors. For more information, visit convergetp.com.

For further information contact:

Converge Technology Solutions Corp.
Email: [e-mail]
Phone: [phone]

Summary of Condensed Interim Consolidated Statements of Financial Position
(expressed in thousands of dollars)

		September 30, 2021		December 31, 2020
Assets
Current assets
Cash		$	210,344	$	64,767
Restricted cash			11,467
Trade and other receivables			358,549		364,308
Inventories			79,551		37,868
Prepaid expenses and other assets			15,466		10,376
			675,377		477,319
Long-term assets
Property, equipment, and right-of-use assets, net			28,805		23,558
Intangible assets, net			238,618		108,926
Goodwill			325,988		110,068
Other non-current assets			1,272		749
		$	1,270,060	$	720,620
Liabilities and shareholders' equity
Current liabilities
Trade and other payables		$	446,560	$	398,003
Borrowings			849		133,281
Other financial liabilities			35,808		22,125
Deferred revenue and other liabilities			34,617		17,376
Income taxes payable			5,769		764
			523,603		571,549
Long-term liabilities
Other financial liabilities			88,303		28,858
Borrowings			579		5,882
Deferred tax liability			49,693		12,584
		$	662,178	$	618,873
Shareholders' equity
Common shares			633,271		135,354
Contributed surplus			1,193
Exchange rights			2,614		4,853
Foreign exchange translation reserve			794		817
Deficit			(29,990)		(39,277)
			607,882		101,747
		$	1,270,060	$	720,620

Summary of Condensed Interim Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)
(expressed in thousands of dollars)

		Three months ended September 30,				Nine months ended September 30,
			2021		2020		2021		2020
Revenues
Product		$	289,591	$	143,450	$	823,385	$	509,141
Service			77,758		46,425		199,473		150,101
Total revenue			367,349		189,875		1,022,858		659,242
Cost of sales			283,578		137,480		793,047		497,163
Gross profit			83,771		52,395		229,811		162,079
Selling, general and administrative expenses			66,092		38,942		173,365		128,518
Income before the following			17,679		13,453		56,446		33,561
Depreciation and amortization			10,162		5,180		24,548		16,204
Finance expense, net			1,528		5,138		5,675		15,953
Special charges			8,702		1,865		17,107		7,914
Share-based compensation expense			1,193		-		1,193		-
Other expenses (income)			(8,491)		506		(5,485)		(114)
Income (loss) before income taxes			4,585		764		13,408		(6,396)
Income tax expense (recovery)			(11)		70		4,121		(1,271)
Net income (loss)		$	4,596	$	694	$	9,287	$	(5,125)
Other comprehensive income (loss)
Exchange (gain) loss on translation of foreign operations			641		(345)		23		403
Comprehensive income (loss)		$	3,955	$	1,039	$	9,264	$	(5,528)
Adjusted EBITDA		$	18,862	$	14,619	$	59,349	$	37,119

Summary of Condensed Interim Consolidated Statements of Cash Flows

			For the three months ended September 30,			For the nine months ended September 30,
			2021		2020			2021		2020
Cash flows from operating activities
Net income (loss)		$	4,596	$	694	$		9,287	$	(5,125)
Adjustments to reconcile net income (loss) to net cash from operating activities
Depreciation and amortization			10,324		6,479			26,635		20,277
Unrealized foreign exchange losses (gains)			(7,991)		401			(5,025)		(608)
Share-based compensation expense			1,193		-			1,193		-
Finance expense, net			1,528		5,138			5,675		15,953
Change in fair value of contingent consideration			3,808		-			4,405		-
Income tax expense (recovery)			(11 )		70			4,121		(1,271)
			13,447		12,782			46,291		29,226
Changes in non-cash working capital items
Trade and other receivables			34,045		15,887			93,065		45,947
Inventories			(7,103)		2,501			(31,290)		(1,159)
Prepaid expenses and other assets			(4,146)		(313)			(4,447)		4,927
Trade and other payables			16,896		(5,906)			(48,706)		(5,273)
Income taxes payable			(634)		(195)			(2,613)		(845)
Other financial liabilities			6		3			1,877		(405)
Deferred revenue and customer deposits			(4,390)		1,114			13,123		4,767
Cash from operating activities			48,121		25,873			67,300		77,185
Cash flows from investing activities
Purchase of property and equipment			(810)		(458)			(3,661)		(1,331)
Proceeds on disposal of property and equipment			421		(2)			552		252
Repayment of contingent consideration			-		-			(5,502)		(3,830)
Repayment of deferred consideration			(1,879)		(4,306)			(5,627)		(9,077)
Business combinations, net of cash acquired			(148,143 )		-			(244,293)		(6,699)
Cash used in investing activities			(150,411 )		(4,766)			(258,531)		(20,685)
Cash flows from financing activities
Transfers to restricted cash			(11,467)		-			(11,467)		(250)
Interest paid			(561)		(3,790)			(5,639)		(12,420)
Payments of lease liabilities			(2,584)		(2,246)			(7,001)		(7,501)
Proceeds from issuance of common shares			248,370		50,730			493,886		60,387
Repurchase of common shares			-		-			-		(2,125)
Repayment of notes payable			(376)		(83)			(3,790)		(257)
Repayment of borrowings			(51,900)		(42,694)			(135,448)		(56,016)
Cash from (used in) financing activities			181,482		1,917			330,541		(18,182)
Net change in cash during the period			79,192		23,024			139,310		38,318
Effect of foreign exchange on cash			6,229		(345)			6,267		143
Cash, beginning of period			124,923		36,372			64,767		20,590
Cash, end of period		$	210,344	$	59,051	$		210,344	$	59,051

Adjusted EBITDA (Non-IFRS Financial Measurement)

Adjusted EBITDA represents net loss or income adjusted to exclude amortization, depreciation, interest expense and finance costs, foreign exchange gains and losses, income tax expense, and special charges. Special charges consist primarily of restructuring related expenses for employee terminations, lease terminations, and restructuring of acquired companies, as well as certain legal fees or provisions related to acquired companies. From time to time, it may also include adjustments in the fair value of contingent consideration, and other such non-recurring costs related to restructuring, financing, and acquisitions. The Company uses Adjusted EBITDA to provide investors with a supplemental measure of its operating performance and thus highlight trends in its core business that may not otherwise be apparent when relying solely on IFRS financial measures. The Company believes that securities analysts, investors and other interested parties frequently use non-IFRS measures in the evaluation of issuers. Management also uses non-IFRS measures in order to facilitate operating performance comparisons from period to period, prepare annual operating budgets and assess the ability to meet capital expenditure and working capital requirements.

Adjusted EBITDA is not a recognized, defined or standardized measure under IFRS. The Company's definition of Adjusted EBITDA will likely differ from that used by other companies and therefore comparability may be limited. Adjusted EBITDA should not be considered a substitute for or in isolation from measures prepared in accordance with IFRS. Investors are encouraged to review the Company's financial statements and disclosures in their entirety and are cautioned not to put undue reliance on non-IFRS measures and view them in conjunction with the most comparable IFRS financial measures. The Company has reconciled Adjusted EBITDA to the most comparable IFRS financial measure as follows:

		For the three months ended September 30,				For the nine months ended September 30,
			2021		2020		2021		2020
Net income (loss) before taxes		$	4,585	$	764	$	13,408	$	(6,396)
Finance expense			1,528		5,318		5,675		15,953
Share-based compensation expense			1,193				1,193
Depreciation and amortization			10,162		5,180		24,548		16,204
Depreciation included in cost of sales			683		1,271		2,443		4,052
Foreign exchange loss (gain)			(7,991)		401		(5,025)		(608)
Special charges			8,702		1,865		17,107		7,914
Adjusted EBITDA		$	18,862	$	14,619	$	59,349	$	37,119

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 filings statement available on SEDAR under the Company's profile at www.sedar.comincluding its most recent Annual Information Form, its Management Discussion and Analysis and its Annual and Quarterly Financial Statements.