Softchoice Corporation (“Softchoice” or the “Company”) (TSX: SFTC) today announced its financial results for the second quarter ended June 30, 2023 (“Q2 2023”). Softchoice will hold a conference call/webcast to discuss its results today, August 11, 2023, at 8:30 a.m. ET. Unless otherwise noted, all dollar ($) amounts are in U.S. dollars.
Q2 2023 Summary 1
Andrew Caprara, Softchoice’s Chief Executive Officer, said: 2
“We continued to deliver strong growth in Software & Cloud, driven by solid customer growth and our ability to provide mission critical and recurring revenue-generating software and cloud solutions. Along with our disciplined approach to managing the business, this enabled us to offset the impacts of the industry-wide decline in hardware sales. Continued strong growth in public cloud is driven by increases in our sales capacity, market demand and our deep technical capabilities. With demand remaining strong in our strategic focus areas and our key technology partners introducing transformative technology including generative AI, we are accelerating investments in our technical and sales capabilities, which we believe will further drive growth for our business and success for our customers.”
Jonathan Roiter, Softchoice’s Chief Financial Officer, said: 2
"The second quarter was highlighted by healthy profit margins driven by prudent expense management and strong cash flow generation, which was used to return capital to shareholders through our quarterly dividend and share buybacks, and to reduce debt. We ended the quarter in a robust financial position with significant available liquidity and flexibility to continue enhancing shareholder value. Despite the anticipated continuation of macroeconomic pressure impacting hardware sales in the near term, we continue to target healthy organic EBITDA growth due to continued demand for our core IT solutions and prudent management of our administrative and variable costs.”
Dividends and NCIB Update 2
Supplementary Measures for the LTM period ended June 30, 20231
Financial Summary1 |
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US$ M except per share amounts, percentages and ratios |
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Operations |
Q2 2023 |
Q2 2022 |
Change % |
Change in Constant Currency* % |
YTD 2023 |
YTD 2022 |
Change % |
Change in Constant Currency* % |
Gross Sales |
577.3 |
583.1 |
(1.0%) |
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1,083.3 |
1,049.7 |
3.2% |
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Net sales |
207.6 |
254.3 |
(18.4%) |
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416.4 |
477.2 |
(12.8%) |
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Gross profit |
82.9 |
83.3 |
(0.5%) |
1.5% |
157.1 |
150.4 |
4.5% |
6.9% |
Adjusted EBITDA |
24.9 |
25.0 |
(0.4%) |
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39.4 |
35.0 |
12.8% |
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as a Percentage of Gross Profit |
30.0% |
30.0% |
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25.1% |
23.2% |
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Income from operations |
19.0 |
18.4 |
3.0% |
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28.6 |
22.2 |
28.6% |
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Net income (loss) |
14.1 |
7.8 |
81.2% |
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18.6 |
11.5 |
61.9% |
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Net income (loss) per Diluted Share |
$0.23 |
$0.12 |
91.7% |
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$0.31 |
$0.18 |
72.2% |
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Adjusted Net Income |
13.9 |
16.7 |
(16.8%) |
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21.0 |
21.3 |
(1.5%) |
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Adjusted EPS (Diluted) |
$0.23 |
$0.27 |
(14.8%) |
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$0.35 |
$0.34 |
2.9% |
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Cash flow |
Q2 2023 |
Q2 2022 |
Change % |
LTM to Jun. 30, 2023 |
LTM to Jun. 30, 2022 |
Change % |
Net cash provided by operating activities, excluding change in non-cash operating working capital |
18.6 |
18.4 |
1.3% |
50.8 |
41.8 |
21.4% |
Net cash provided by operating activities |
53.5 |
42.6 |
25.6% |
48.6 |
28.7 |
69.1% |
Adjusted Free Cash Flow |
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76.6 |
63.9 |
19.8% |
Adjusted Free Cash Flow Conversion |
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89% |
88% |
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Financial Position, as at: |
Jun. 30, 2023 |
Jun. 30, 2022 |
Consolidated net debt** |
88.6 |
95.7 |
Net debt to Adjusted EBITDA ratio |
1.0 |
1.3 |
Gross Sales and Gross Profit by IT Solution Type and Sales Channel |
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US$ M except per share amounts and percentages |
Q2 2023 |
Q2 2022 |
Change % |
Change in Constant Currency* % |
YTD 2023 |
YTD 2022 |
Change % |
Change in Constant Currency* % |
Gross Sales by IT Solution Type: |
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Software & Cloud |
440.6 |
399.1 |
10.4% |
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805.1 |
698.1 |
15.3% |
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Services |
27.6 |
31.3 |
(11.7%) |
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55.2 |
56.0 |
(1.5%) |
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Hardware |
109.0 |
152.7 |
(28.6%) |
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223.1 |
295.6 |
(24.5%) |
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Gross Profit by IT Solution Type: |
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Software & Cloud |
58.4 |
54.1 |
7.8% |
10.4% |
106.8 |
94.5 |
13.1% |
16.2% |
as a percentage of Gross Sales |
13.2% |
13.6% |
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13.3% |
13.5% |
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Services |
8.1 |
8.3 |
(2.2%) |
(2.4%) |
16.0 |
14.8 |
8.3% |
8.2% |
as a percentage of Gross Sales |
29.3% |
26.4% |
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28.9% |
26.3% |
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Hardware |
16.5 |
20.9 |
(21.2%) |
(19.9%) |
34.4 |
41.2 |
(16.6%) |
(14.8%) |
as a percentage of Gross Sales |
15.1% |
13.7% |
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15.4% |
13.9% |
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Gross Sales by Sales Channel: |
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SMB |
139.1 |
133.1 |
4.6% |
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247.0 |
226.0 |
9.3% |
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Commercial |
323.1 |
310.4 |
4.1% |
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567.6 |
542.9 |
4.5% |
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Enterprise |
115.0 |
139.6 |
(17.6%) |
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268.7 |
280.8 |
(4.3%) |
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Gross Profit by Sales Channel: |
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SMB |
18.9 |
18.2 |
4.2% |
5.8% |
35.6 |
33.3 |
7.0% |
9.0% |
as a percentage of Gross Sales |
13.6% |
13.6% |
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14.4% |
14.7% |
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Commercial |
49.3 |
48.7 |
1.1% |
3.4% |
90.3 |
84.8 |
6.5% |
9.1% |
as a percentage of Gross Sales |
15.2% |
15.7% |
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15.9% |
15.6% |
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Enterprise |
14.7 |
16.4 |
(10.3%) |
(8.7%) |
31.2 |
32.3 |
(3.3%) |
(1.1%) |
as a percentage of Gross Sales |
12.8% |
11.8% |
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11.6% |
11.5% |
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Amounts may not add to total due to rounding |
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* Q2 2023 and YTD 2023 in Constant Currency are translated at the average foreign exchange rate of Q2 2022 and YTD 2022, which were $0.78 CAD/USD and $0.79 CAD/USD, respectively. |
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** Consolidated net debt equates to loans and borrowings plus lease liabilities less cash-on-hand |
Quarterly Conference Call
Softchoice’s management team will hold a conference call to discuss our Q2 2023 results today at 8:30 a.m. (ET).
DATE: Friday, August 11, 2023
TIME: 8:30 a.m. Eastern Time
WEBCAST: https://app.webinar.net/eoxMyMW82Eq
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.
DIAL-IN: To join the conference call without operator assistance, you may register and enter your phone number at https://emportal.ink/43hKUcO to receive an instant automated call back. You can also dial direct to be entered to the call by an Operator: 416-764-8659 or 1-888-664-6392.
TAPED REPLAY: 416-764-8677 or 1-888-390-0541, Replay Code 353068 # (Available until August 18, 2023)
Capitalized Terms
Capitalized terms used in this release and terms we use to describe our IT solution types, including Software & Cloud, Services, and Hardware and sales channels including SMB, Commercial, and Enterprise, as well as other measures such as Customer, Gross Profit per Customer, Revenue Retention Rate, and Constant Currency, are described in the Company’s Management’s Discussion and Analysis of Financial Condition and Results of Operations the three and six-months ended June 30, 2023 and June 30, 2022 (the “Q2 2023 MD&A”), and/or our annual information form dated March 29, 2023 (the “AIF”) filed on SEDAR (as defined below) 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”, “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 2023 MD&A filed on SEDAR and available on the Company’s investor relations website http://investors.softchoice.com.
Reconciliations of Non-IFRS Financial Measures |
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(Information in thousands of U.S. dollars, unless otherwise stated) |
Three Months Ended June 30, |
Six Months Ended June 30, |
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Reconciliation of Net Sales to Gross Sales |
2023 |
2022 |
2023 |
2022 |
Net sales |
207,555 |
254,310 |
416,371 |
477,232 |
Net adjustment for sales transacted as agent |
369,719 |
328,763 |
666,945 |
572,450 |
Gross Sales |
577,274 |
583,073 |
1,083,316 |
1,049,682 |
Reconciliation of Operating Expenses to Adjusted Cash Operating Expenses |
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Operating expenses |
63,972 |
64,930 |
128,531 |
128,156 |
Depreciation and amortization |
(4,428) |
(4,897) |
(9,169) |
(9,770) |
Equity-settled share-based compensation and other costs (1) |
(1,527) |
(1,142) |
(1,687) |
(1,714) |
Non-recurring compensation and other costs (2) |
1 |
(2) |
(94) |
(22) |
Business transformation non-recurring costs (3) |
– |
(337) |
(3) |
(898) |
Non-recurring legal provision (4) |
– |
(235) |
115 |
(322) |
Adjusted Cash Operating Expenses |
58,018 |
58,317 |
117,693 |
115,430 |
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Reconciliation of Income from operations to Adjusted EBITDA |
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Income from operations |
18,960 |
18,402 |
28,600 |
22,241 |
Depreciation and amortization |
4,428 |
4,897 |
9,169 |
9,770 |
Equity-settled share-based compensation and other costs (1) |
1,527 |
1,142 |
1,687 |
1,714 |
Non-recurring compensation and other costs (2) |
(1) |
2 |
94 |
22 |
Business transformation non-recurring costs (3) |
– |
337 |
3 |
898 |
Non-recurring legal provision (4) |
– |
235 |
(115) |
322 |
Adjusted EBITDA |
24,914 |
25,015 |
39,438 |
34,967 |
Adjusted EBITDA as a Percentage of Gross Profit (5) |
30.0% |
30.0% |
25.1% |
23.2% |
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Reconciliation of Net Income to Adjusted Net Income |
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Net income |
14,110 |
7,788 |
18,647 |
11,517 |
Amortization of intangible assets |
2,825 |
3,230 |
5,989 |
6,438 |
Equity-settled share-based compensation and other costs (1) |
1,527 |
1,142 |
1,687 |
1,714 |
Non-recurring compensation and other costs (2) |
(1) |
2 |
94 |
22 |
Business transformation non-recurring costs (3) |
– |
337 |
3 |
898 |
Non-recurring legal provision (4) |
– |
235 |
(115) |
322 |
Loss (gain) on lease modification (6) |
– |
– |
4 |
(209) |
Foreign exchange (gain) loss (7) |
(4,184) |
5,862 |
(4,063) |
3,208 |
Other non-recurring expense (8) |
87 |
– |
87 |
– |
Related tax effects (9) |
(494) |
(1,931) |
(1,342) |
(2,606) |
Adjusted Net Income |
13,870 |
16,665 |
20,991 |
21,304 |
Weighted Average Number of Shares (Basic) |
57,886,682 |
59,186,978 |
57,972,248 |
59,348,710 |
Weighted Average Number of Shares (Diluted) |
60,235,769 |
62,850,758 |
60,321,335 |
63,012,490 |
Adjusted EPS (Basic) (10) |
0.24 |
0.28 |
0.36 |
0.36 |
Adjusted EPS (Diluted) (10) |
0.23 |
0.27 |
0.35 |
0.34 |
The following measures are reported on a trailing twelve-month basis only: |
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Reconciliation of Net Cash Provided by Operating Activities to Adjusted Free Cash Flow |
Trailing Twelve-Months Ended June 30, |
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2023 |
2022 |
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Net cash provided by operating activities |
48,605 |
28,736 |
Adjusted for: |
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Share-based compensation and other costs (11) |
1,286 |
8,410 |
Non-recurring compensation and other costs (2) |
3,897 |
191 |
Business transformation non-recurring costs (3) |
552 |
1,731 |
IPO related costs (12) |
– |
314 |
Follow-On Offering costs (13) |
– |
287 |
Non-recurring legal provision (4) |
(115) |
2,036 |
Realized foreign exchange gain |
9,311 |
3,796 |
Finance and other expense (14) |
(81) |
(282) |
Cash taxes paid, net |
10,576 |
9,831 |
Cash interest paid |
10,033 |
4,856 |
Change in non-cash operating working capital |
2,166 |
12,800 |
Adjusted EBITDA |
86,230 |
72,706 |
Maintenance Capex |
(3,847) |
(2,016) |
IFRS 16 lease payments |
(5,803) |
(6,791) |
Adjusted Free Cash Flow |
76,580 |
63,899 |
Adjusted Free Cash Flow Conversion |
89% |
88% |
Notes (Refer to the Q2 2023 MD&A for description of the sections with parentheses within these Notes)
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, market share, budgets, operations, financial results, taxes, dividend policy, NCIB, operating environment, business plans and objectives. Particularly, information regarding our expectations of future results, performance, growth, 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 future market share growth, including among others, organic growth; (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 program; and (ix) the impact of macroeconomic conditions and remote and hybrid work on our business, financial position, results of operations and/or cashflows.
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 2023 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. Softchoice does not undertake any obligation to update such forward-looking information, whether as a result of new information, future events or otherwise, except as expressly required under applicable securities laws.
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/20230811791170/en/
Investor Relations
Tim Foran
(416) 986-8515
[email protected]
Press
Justin Hane
(647) 917-1761
[email protected]