Softchoice Corporation (“Softchoice” or the “Company”) (TSX: SFTC) today announced its financial results for the first quarter (“Q1 2024”) ended March 31, 2024. Softchoice will hold a conf...
TORONTO: Softchoice Corporation (“Softchoice” or the “Company”) (TSX: SFTC) today announced its financial results for the first quarter (“Q1 2024”) ended March 31, 2024. Softchoice will hold a conference call/webcast to discuss its results today, May 8, 2024, at 8:30 a.m. ET. Unless otherwise noted, all dollar ($) amounts are in U.S. dollars.
Quarterly highlights1
Andrew Caprara, Softchoice’s Chief Executive Officer, said: 2
“We executed successfully in the first quarter on our three strategic priority areas that we outlined for 2024. We continued building a world-class culture, recording increases in our overall team member retention, salesforce tenure and internal engagement scores, as well as having been named a top 10 workplace in Canada by Great Place to Work®, recognizing our outstanding employee experience and workplace culture. Secondly, our customer growth has returned to pre-pandemic levels driven by a combination of higher retention underpinned by better satisfaction rates, and success in increasing new buying accounts across all sales channels driven by our expanded salesforce. Thirdly, our investments in advanced technical capabilities continued to drive deeper customer relationships and growth in our strategic focus areas of secure, AI-powered cloud and digital workplace solutions supported by our advanced software asset management methodology and capabilities.
”Customer demand for generative AI has been rapidly accelerating, which we are converting through the adoption of Copilot for Microsoft 365. We’ve taken a leadership position in this space, as measured by the volume of consulting engagements that prepare customers for Copilot adoption. And with the launch of our AI Solutions team in Q1, supported by the activation of our strategic partnership agreement with Microsoft, our focus is on moving customers from generative AI planning and pilot phases into more complex and long-term transformation programs.”
Dividends Update 2
Supplementary Measures for the trailing twelve months (LTM) period ended March 31, 20241
Financial Summary1 | ||||
US$ M except per share amounts, percentages and ratios | ||||
Operations | Q1 2024 | Q1 2023 | Change % | Change in Constant Currency* % |
Gross Sales | 480.3 | 506.0 | (5.1)% |
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Net sales | 169.8 | 208.8 | (18.7)% |
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Gross profit | 76.6 | 74.2 | 3.3% | 3.0% |
as a percentage of Gross Sales | 16.0% | 14.7% |
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Adjusted EBITDA | 15.1 | 14.5 | 4.3% | 3.9% |
as a Percentage of Gross Profit | 19.8% | 19.6% |
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Income from operations | 10.6 | 9.6 | 10.3% |
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Net (loss) income | (1.0) | 4.5 | NMF |
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Net (loss) income per Diluted Share | ($0.02) | $0.08 | NMF |
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Adjusted Net Income | 4.4 | 7.1 | (37.6%) |
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Adjusted EPS (Diluted) | $0.07 | $0.12 | (41.7%) |
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Cash flow | Q1 2024 | Q1 2023 | Change % | LTM to Mar. 31, 2024 | LTM to Mar. 31, 2023 | Change % |
Net cash provided by operating activities, excluding change in non-cash operating working capital | 3.1 | 9.7 | (67.7%) | 58.2 | 50.5 | 15.1% |
Net cash provided by operating activities | (23.6) | (17.1) | 38.3% | 93.3 | 37.7 | 147.5% |
Free Cash Flow |
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| 48.8 | 53.8 | (9.3%) |
Cdn. | Cdn. | Cdn. | Cdn. | |||
Dividend per share | $0.13 | $0.11 | 18.2% | $0.46 | $0.38 | 21.1% |
Financial Position, as at: | Mar. 31, 2024 | Mar. 31, 2023 |
Loans and borrowings less Cash | 51.4 | 115.8 |
Consolidated net debt** to Adjusted EBITDA ratio | 0.7 | 1.5 |
Gross Sales and Gross Profit by IT Solution Type and Sales Channel | ||||
| Q1 2024 | Q1 2023 | Change % | Change in Constant Currency* % |
Gross Sales by IT Solution Type*: |
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Software & Cloud | 358.0 | 364.4 | (1.8)% |
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Services | 28.0 | 27.6 | 1.8% |
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Hardware | 94.3 | 114.1 | (17.3)% |
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Gross Profit by IT Solution Type: |
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Software & Cloud | 53.0 | 48.4 | 9.4% | 9.3% |
as a percentage of Gross Sales | 14.8% | 13.3% |
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Services | 8.0 | 7.9 | 1.3% | 1.1% |
as a percentage of Gross Sales | 28.5% | 28.6% |
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Hardware | 15.6 | 17.9 | (12.7)% | (13.2)% |
as a percentage of Gross Sales | 16.5% | 15.7% |
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Gross Sales by Sales Channel*: |
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SMB | 134.4 | 107.8 | 24.6% |
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Commercial | 238.3 | 244.5 | (2.5)% |
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Enterprise | 107.6 | 153.7 | (30.0)% |
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Gross Profit by Sales Channel: |
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SMB | 20.7 | 16.7 | 23.8% | 17.8% |
as a percentage of Gross Sales | 15.4% | 15.5% |
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Commercial | 42.1 | 41.0 | 2.5% | 4.7% |
as a percentage of Gross Sales | 17.7% | 16.8% |
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Enterprise | 13.9 | 16.5 | (15.8)% | (16.1)% |
as a percentage of Gross Sales | 12.9% | 10.7% |
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Amounts may not add to total due to rounding | ||||
* Q1 2024 in Constant Currency is translated at the average foreign exchange rate of Q1 2023, which was $0.74 CAD/USD. | ||||
** 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 Q1 2024 results today at 8:30 a.m. (ET).
DATE: Wednesday, May 8, 2024
TIME: 8:30 a.m. Eastern Time
WEBCAST: https://app.webinar.net/D4y2dzOQ387
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/3PKSecU 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 504830 # (Available until May 15, 2024)
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 for the three months ended March 31, 2024 and March 31, 2023 (the “Q1 2024 MD&A”), and/or our annual information form dated March 27, 2024 (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 “Gross Sales”, “Adjusted EBITDA”, “Adjusted EBITDA as a Percentage of Gross Profit”, “Adjusted Cash Operating Expenses”, “Adjusted Net Income (Loss)”, “Adjusted EPS”, and “Free Cash Flow”. 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 Q1 2024 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 March 31, | |
Reconciliation of Net Sales to Gross Sales | 2024 | 2023 |
Net sales | 169,760 | 208,816 |
Net adjustment for sales transacted as agent | 310,557 | 297,226 |
Gross Sales | 480,317 | 506,042 |
Reconciliation of Operating Expenses to Adjusted Cash Operating Expenses |
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Operating expenses | 65,985 | 64,559 |
Depreciation and amortization | (2,413) | (4,741) |
Equity-settled share-based compensation and other costs (1) | (2,098) | (160) |
Non-recurring compensation and other costs (2) | – | (95) |
Business transformation non-recurring costs (3) | – | (3) |
Non-recurring legal recovery (4) | – | 115 |
Adjusted Cash Operating Expenses | 61,474 | 59,675 |
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Reconciliation of Income from operations to Adjusted EBITDA |
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Income from operations | 10,630 | 9,640 |
Depreciation and amortization | 2,413 | 4,741 |
Equity-settled share-based compensation and other costs (1) | 2,098 | 160 |
Non-recurring compensation and other costs (2) | – | 95 |
Business transformation non-recurring costs (3) | – | 3 |
Non-recurring legal recovery (4) | – | (115) |
Adjusted EBITDA | 15,141 | 14,524 |
Adjusted EBITDA as a Percentage of Gross Profit (5) | 19.8% | 19.6% |
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Reconciliation of Net Income to Adjusted Net Income |
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Net (loss) income | (1,028) | 4,537 |
Amortization of intangible assets | 585 | 3,164 |
Equity-settled share-based compensation and other costs (1) | 2,098 | 160 |
Non-recurring compensation and other costs (2) | – | 95 |
Business transformation non-recurring costs (3) | – | 3 |
Non-recurring legal recovery (4) | – | (115) |
Loss on lease modification | – | 4 |
Foreign exchange loss (6) | 3,934 | 121 |
Related tax effects (7) | (1,149) | (848) |
Adjusted Net Income | 4,440 | 7,121 |
Weighted Average Number of Shares (Basic) | 59,814,323 | 58,058,765 |
Weighted Average Number of Shares (Diluted) | 59,943,973 | 60,457,312 |
Adjusted EPS (Basic) (8) | 0.07 | 0.12 |
Adjusted EPS (Diluted) (8) | 0.07 | 0.12 |
The following measures are reported on a trailing twelve-month basis only:
Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow | Trailing Twelve-Months Ended March 31, | |
2024 | 2023 | |
Net cash provid
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