Converge Technology Solutions Reports Third Quarter 2018 Results

/NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES/

VANCOUVER and TORONTO, Nov. 27, 2018 /CNW/ - Converge Technology Solutions Corp. ("Converge" or "Company") (TSXV:CTS), a Hybrid IT solutions provider, today reported financial results of Converge Technology Partners Inc. (the operating company) for the three and nine months ended September 30, 2018.

Financial Highlights
Financial results for the three and nine months ended September 30, 2018 follow.  Note that for the three and nine months ended September 30, 2017, the Company was inactive operationally and therefore there are no comparable results.

• Revenue was $100.0 million for the three months ended September 30, 2018, down slightly from the three months ended June 30, 2018 of $103.3 million reflecting the expected seasonality in the business.
• Revenue was $323.1 million for the nine months ended September 30, 2018.
• Gross profit for the three months ended September 30, 2018 was $22.6 million, or 22.6% compared to $24.8 million or 24.0% for the three months ended June 30, 2018. 
• Gross profit for the nine months ended September 30, 2018 was $65.9 million, or 20.4%
• Adjusted EBITDA loss was $0.2 million for the three months ended September 30, 2018, compared to adjusted EBITDA income of $5.3 million
• Adjusted EBITDA income for the nine months ended September 30, 2018 was $10.7 million

"Converge has come a long way in a little over a year. At September 30 last year, we had no revenue, no profits, no hybrid IT capability and a very small management team. We have since acquired five companies, invested in new capabilities, and are driving forward with all elements of our strategic plan.  We have built the foundation and put the team in place to execute on our acquisition and growth strategy" said Shaun Maine, CEO.  "This includes focusing on cross selling opportunities among our acquired companies and growing our cloud focused managed services capabilities as we strive to become a premier North American hybrid IT partner."

Mr. Maine also provided commentary on seasonality within the business. "As discussed in our recent business update call, Q1 and Q2 have historically been strongest in our Canadian operations, with Q4 being historically strong for our US acquisitions.  We expect that pattern to continue.  We also look forward to realizing the benefits of our higher certification levels, such as our recently announced Cisco Gold certification which took effect in August.  We expect a particular uptick in Cisco rebate levels in Q3 of 2019 given the ramp up of sales activity that typically occurs leading up to Cisco's year end".   

During the three months ended September 30, 2018, the Company issued 6,918,756 common shares for total proceeds of $5.5 million, with the funds deposited in escrow until the initial public offering; and 3,331,000 common share warrants were exercised to acquire one common share at an exercise price of $0.50 per common share for total proceeds of $1.7 million.

Quarterly Results Materials
The Company's outlook is contained in its MD&A for the three and nine months ended September 30, 2018, which is available along with the unaudited condensed interim financial statements, at www.convergetp.com and at www.sedar.com.

Updates Subsequent to Quarter End

• On October 11, 2018, a wholly-owned subsidiary of the Company entered in a revolving credit agreement with a Canadian lender to a maximum of $30 million, secured by assets of the Company.  Amendments were also made to the existing revolving credit agreements with the subsidiary companies.
• The Company issued a $5.3 million principal amount secured convertible debenture due October 30, 2020 and bearing interest at 8% per annum to a strategic third party investor.
• The Company loaned $5.3 million to Essex Holdings, Canada Inc. ("Essex Canada"), in the form of a demand promissory note bearing interest at 10% per annum, the proceeds of which were used by Essex Canada to facilitate the acquisition by its wholly owned subsidiary Essextec Acquisition, LLC of Essex Technology Group, Inc. ("Essextec") and for general working capital purposes.  The Company also entered into a management agreement with Essextec, bringing additional revenue as well as new technologies and capabilities to the Converge family.
• On November 7, 2018, the Company completed the qualifying transaction ("Qualifying Transaction") of the Company pursuant to Policy 2.4 of the TSX Venture Exchange Inc. ("TSX Venture") and was described in the Company's filing statement dated November 1, 2018 (the "Filing Statement") filed on SEDAR at www.sedar.com.   The Resulting Issuer changed its name from Norwick Capital Corp. ("Norwick") to Converge Technology Solutions Corp., effective November 7, 2018, and the Company's now trades under the symbol "CTS" (previously "NWK.P")
• 70,458,584 Class A common shares and 7,861,490 common share purchase warrants of Converge were exchanged for 70,458,584 post-consolidation common shares and 7,861,490 post-consolidation common share purchase warrants of Norwick. 
• On November 7, 2018, concurrently with the completion of the Qualifying Transaction, and in accordance with the terms of the unsecured debentures issued on September 30, 2017, 3,896,450 additional common shares were issued to the debenture holders.  

"We accomplished a lot in Q3 and subsequent to quarter end, including the evolution to becoming a public company" continued Mr. Maine.  "With our strong team of industry leaders now in place, we look forward to continuing to execute on our plan and reporting on our continued progress in the coming months".

Third Quarter Conference Call

At 8:30 a.m. eastern on Wednesday, November 28, 2018, the Company will host a conference call featuring management's quarterly remarks and follow-up question and answer period with analysts.  The conference call can be accessed live by dialing 1-877-489-7753 five minutes prior to the scheduled start time.

A recording of the call will be available and posted on the Company's website.

About Converge

Converge Technology Solutions Corp. combines innovation accelerators and foundational infrastructure solutions to deliver best-of-breed solutions and services to customers. The Company is building a platform of regionally-focused Hybrid IT solution providers to enhance their ability to provide multi-cloud solutions, blockchain, resiliency, and managed services, enabling Converge to address the business and IT issues that public and private-sector organizations face today.

Notice to Reader:  Use of Non-IFRS Financial Measures and Forward-Looking Statements

1. Non-IFRS Financial Measures
   In this news release, management uses certain non-IFRS measures to evaluate the performance of the Company.  The term "Adjusted EBITDA" does not have any standardized meaning prescribed within IFRS and therefore may not be comparable to similar measures presented by other companies.  Such measures should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS such as net income.  Adjusted EBITDA is defined as gross profit less selling, general and administrative expenses, and corresponds to income before income tax, depreciation and amortization, finance expenses, change in fair value of contingent consideration, transaction costs for acquisitions, initial public offering costs and other non-operating expenses.
   
   Management believes Adjusted EBITDA is an important indicator as it excludes certain items that are non-cash expenses, items that cannot be influenced by management in the short term and items that do not impact core operating performance, demonstrating the Company's ability to generate liquidity through operating cash flow to fund working capital needs, service outstanding debt and fund future capital expenditures.  Adjusted EBITDA is used by some investors and analysts for the purposes of valuing an issuer.  The intent of Adjusted EBITDA is to provide additional useful information to investors and analysts and is also used by management as an internal performance measurement. A reconciliation of Adjusted EBITDA to net income is contained in the MD&A (see "Non-IFRS Financial Measures").
   
   
2. 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 filing statement dated November 1, 2018 which is available on SEDAR under the Company's profile at www.sedar.com in addition to the unaudited condensed consolidated interim financial statements for the three and nine month periods ended September 30, 2018 together with the corresponding Management's Discussion and Analysis for additional risk factors described under "Risk Management".

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.

This press release does not constitute an offer to sell or a solicitation of an offer to buy any of the securities in the United States. The securities have not been and will not be registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act") or any state securities laws and may not be offered or sold within the United States unless registered under the U.S. Securities Act and applicable state securities laws, unless an exemption from such registration is available.

SOURCE Converge Technology Solutions Corp.

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