FOURTH QUARTER OVERVIEW
- Revenue was
$307.2 million , compared to$301.6 million in Q4 2018 - Gross profit was
$42.9 million , compared to$42.5 million in Q4 2018 - Gross profit margin was 14.0%, compared to 14.1% in Q4 2018
- Adjusted EBITDA1 increased 56.2% to
$7.5 million 2, compared to$4.8 million in Q4 2018 - The Company recognized a pre-tax gain of
$22.3 million on the Smart Edge sale - Net income attributable to shareholders was
$16.3 million , compared to$0.5 million in Q4 2018 - Diluted earnings per share ("EPS") was
$0.41 in Q4 2019, compared to$0.01 in Q4 2018
For comparability, fourth quarter results expressed in Canadian dollars ("C$"), translated at 1.3201
- Revenue was
C$405.5 million in Q4 2019, compared toC$399.5 million in Q4 2018 - Gross profit was
C$56.6 million , compared toC$56.0 million in Q4 2018 - Adjusted EBITDA1 was
C$9.8 million in Q4 2019, compared toC$6.2 million in Q4 2018 - The Company recognized a pre-tax gain of
C$29.6 million on the Smart Edge sale - Net income available to shareholders was
C$21.6 million , compared toC$0.6 million in Q4 2018 - Diluted earnings per share was
C$0.54 , compared toC$0.01 in Q4 2018
1 Non-GAAP Measure. See Non-GAAP Measures section of this news release.
2 including the year over year favourable impact of the implementation of IFRS 16 of approximately
2019 OVERVIEW
- Revenue was
$1.22 billion in 2019, compared to$1.37 billion in 2018 - Gross profit was
$164.0 million in 2019, compared to$163.2 million in 2018 - Gross profit margin was 13.5% in 2019, compared to 11.9% in 2018
- Adjusted EBITDA1,3 was
$26.8 million in 2019, an increase of 72.4% compared to$15.5 million in 2018 - Net income available to shareholders was
$14.0 million in 2019, compared to a loss of$4.6 million in 2018; excluding the gain on sale of Smart Edge and the impact from IFRS 16, net income available to shareholders increased$1.5 million - Diluted earnings per share was
$0.35 in 2019, compared to a loss of$0.12 in 2018 - Adjusted Debt4 as at
December 31, 2019 decreased by$21.6 million compared to the prior year, primarily as a result of the Smart Edge sale; as a result, the Adjusted debt to Adjusted EBITDA1 ratio improved year over year from 5.00 to 2.10 - The Company repurchased 237,310 shares at a cost of
$0.3 million through its NCIB
For comparability, fiscal 2019 results expressed in Canadian dollars ("C$"), translated at 1.3269
- Revenue was
C$1.62 billion in 2019, compared toC$1.78 billion in 2018 - Gross profit was
C$217.7 million in 2019, compared toC$211.4 million in 2018 - Adjusted EBITDA1,3 was
C$35.5 million in 2019, compared toC$20.1 million in 2018 - Net income available to shareholders was
C$18.5 million in 2019, compared to a loss ofC$5.9 million in 2018 - Diluted earnings per share was
C$0.46 in 2019, compared to a loss ofC$0.15 in 2018
3including the year over year favourable impact of the implementation of IFRS 16 of approximately
4 Non-GAAP Measure. See Non-GAAP Measures section of this news release.
MANAGEMENT COMMENTARY
"2019 was a transformational year for Pivot. We successfully managed through volume changes with our two major customers, returning to overall revenue growth in Q4, 2019. The increase in revenue was achieved by driving sizeable revenue growth of 6% from non-major customers. In addition, during the quarter, we successfully sold our Smart Edge assets to Intel for
"Adjusted EBITDA was up 56.2% to
The Company introduced a new non-GAAP measure called Adjusted Debt. Adjusted Debt is defined as current liabilities, plus long-term other financial liabilities, less lease obligations and current assets. The Company believes Adjusted Debt normalizes the impact of changes in working capital and therefore it is a more relevant indicator of the Company's net debt position.
"Our Adjusted Debt was
2019 BUSINESS AND OPERATING HIGHLIGHTS
- On
October 25, 2019 the Company completed the sale of its Smart Edge technology to Intel Corporation ("Intel") for gross consideration of$27.0 million –$25.0 million cash on closing, and$2.0 million to be paid 18 months after closing, subject to customary holdback terms and conditions. - In connection with the sale of Smart Edge, Pivot and Intel have entered into a three-year preferred channel partner agreement, which designates Pivot as a non-exclusive preferred system integrator and channel partner for Smart Edge based solutions.
- The Company completed the integration of certain
U.S. wholly owned subsidiaries and related business units through a merger. - The Company announced the promotion of
Scott Ward to the newly created position of Chief Revenue Officer to lead the sales team, and to work closely with strategic partners to expand Pivot's addressable market. - The Normal Course Issuer Bid ("NCIB") was utilized to repurchase 237,310 shares during the fourth quarter.
- The Company announced
Christopher Formant andVic Bhagat were appointed to serve as members of the Board of Directors. - Pivot renewed its credit agreement for five years on more favourable terms with a lending group represented by
JPMorgan Chase Bank . The amended agreement expires onMay 14, 2024 .
DIVIDEND AND NORMAL COURSE ISSUER BID
As previously announced, the Company paid its regular quarterly dividend in the amount of
On
FOURTH QUARTER AND 2019 RESULTS SUMMARY
Fourth quarter 2019 revenues were
Total revenue of
Pivot provided services were
Third-party services of
Gross profit was
Selling general and administrative expenses ("SG&A") of
The Company's sale of Smart Edge resulted in a pre-tax gain of
Adjusted EBITDA1 was
2020 OUTLOOK
Management believes Pivot's opportunities to create shareholder value through its product and advanced services strategy are robust and the secular trends driving IT spending, particularly spending on solutions and services, are positive and expected to grow in line with the overall market's expected growth rate in 2020. While the impact of COVID-19 has been minimal to date, there is uncertainty around its duration and the potential impact on future business conditions. Management is closely monitoring how COVID-19 is affecting Pivot's operations and is taking measures and precautions to protect and inform its employees.
The Company is monitoring trade discussions between the
The Company continually seeks to expand its position in the global IT market organically and through selective acquisitions.
QUARTERLY AND ANNUAL RESULTS MATERIALS
The Company's outlook is contained in its Management's Discussion and Analysis ("MD&A") for the three and twelve months ended
SELECTED FINANCIAL INFORMATION AND OPERATING RESULTS
(in thousands of | 2019 | 2018 | 2017 |
Financial Results | |||
Revenue | 1,218,124 | 1,373,630 | 1,511,641 |
Gross profit | 164,030 | 163,153 | 168,751 |
Income before depreciation and amortization, finance expense, change in | 26,788 | 15,539 | 24,118 |
Net income (loss) | 13,718 | (4,470) | (5,628) |
Net income (loss) attributable to shareholders | 13,967 | (4,591) | (6,057) |
Earnings (loss) per share attributable to shareholders: | |||
Basic ($) | |||
Diluted ($) | |||
Cash dividends declared | 4,776 | 4,900 | 4,973 |
Financial Position (at year end) | |||
Total assets | 421,398 | 421,319 | 527,883 |
Other financial liabilities – current | 111,247 | 100,184 | 136,897 |
Other financial liabilities – non-current portion | 11,547 | 1,178 | 2,443 |
(in thousands of | 2019 | 2018 | 2017 |
Income (loss) before income taxes | 20,684 | (3,463) | 2,800 |
Depreciation and amortization | 14,615 | 11,352 | 11,257 |
Finance expense | 6,027 | 6,120 | 5,450 |
Change in fair value of liabilities | 1,208 | 653 | 209 |
Other expense (income) | (15,746) | 877 | 4,402 |
Adjusted EBITDA1 | 26,788 | 15,539 | 24,118 |
Key metrics on consolidated debt
Adjusted debt
(in thousands of | 2019 | 2018 |
Current liabilities | 379,007 | 401,240 |
Other financial liabilities – non-current portion | 11,547 | 1,178 |
Less: Lease obligations – total | (14,449) | - |
Less: Current assets | (319,958) | (324,685) |
Adjusted debt1 | 56,147 | 77,733 |
Adjusted Debt1 normalizes the impact of the changes in working capital as well as the impact of IFRS 16 in 2019, and therefore, management believes that it is a more relevant indicator of the Company's debt position and is a more comparable metric with industry peers. The decrease of Adjusted Debt1 in 2019 was mainly due to the proceeds of
Below are the key metrics of our consolidated debt as at
2019 | 2018 | |
Adjusted Debt1 to Adjusted EBITDA1 | 2.10 | 5.00 |
Net interest coverage1 | 4.44 | 2.54 |
The improvement in both of these key metrics in 2019 was due to the higher Adjusted EBITDA and margin generated from operations, as well as the proceeds from the sale of Smart Edge.
NON-GAAP MEASURES
The Company uses certain non-GAAP measures to evaluate its performance, defined below. These terms do not have any standardized meaning prescribed within IFRS and therefore may not be comparable to similar measures presented by other issuers. 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 (loss).
Adjusted EBITDA
"Adjusted EBITDA" is defined as gross profit less selling, general and administrative expenses, and corresponds to income (loss) before income taxes, depreciation and amortization, finance expense, change in fair value of liabilities, and other expense (income).
Management believes Adjusted EBITDA is an important indicator of the Company's operating performance as it excludes certain items that are either 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.
Reconciliations of "income (loss) before income taxes" to "Adjusted EBITDA" are provided under the headings "SELECTED FINANCIAL INFORMATION AND OPERATING RESULTS".
Adjusted Debt
"Adjusted Debt" is defined as current liabilities, plus long-term other financial liabilities, less lease obligations and current assets.
The Company's working capital is financed by an asset-based lending facility. The amount drawn on the facility generally fluctuates inversely with changes in other working capital. The Adjusted Debt normalizes the impact of the changes in working capital and therefore, management believes that it is a more relevant indicator of the Company's net debt position.
Adjusted Debt to Adjusted EBITDA
"Adjusted Debt to Adjusted EBITDA" is defined as Adjusted Debt divided by the trailing twelve-month Adjusted EBITDA. The Company uses this measure as an indication of its liquidity position and its ability to generate income to service the debt excluding the impacts of working capital fluctuations.
Net Interest Coverage
"Net Interest Coverage" is defined as Adjusted EBITDA divided by finance expense on a trailing twelve-month basis.
FOURTH QUARTER CONFERENCE CALL
At
A telephone recording of the call will be available for one week (until midnight
ABOUT
Pivot is an industry-leading information technology services and solutions provider to many of the world's most successful companies, including members of the Fortune 1000, as well as governments and educational institutions. By leveraging its extensive original equipment manufacturer (OEM) partnerships and its own fulfillment, professional, deployment, workforce and managed services, Pivot supports the IT infrastructure needs of its clients. For more information, visit www.pivotts.com.
FORWARD LOOKING STATEMENTS
Information in this press release contain forward-looking statements, including statements relating to the growth of the Company and the IT market in 2020. Forward-looking statements are based on assumptions of future events that the Company believes are reasonable based upon information currently available. Actual results could vary significantly from these estimates. Readers are cautioned that assumptions used in the preparation of such information may prove to be incorrect. These assumptions include estimates of the profitability of its operations; growth in IT spending, particularly solutions and services, being in line with the overall market's expected growth rate in future periods; the IT market's growth in 2020 notwithstanding the COVID-19 pandemic and possible supply chain disruption; availability of borrowings under the Company's credit facilities and access to other sources of capital; the improved operational results generated from operational efficiency initiatives; the successful implementation of the initiatives identified in the MD&A as part of the advancement of its strategy; that the Company will be in a financial position to declare and pay a dividend in subsequent periods; or that the Company will be in a financial position to or that it will repurchase any additional shares for cancellation under the NCIB.
Events or circumstances may cause actual results to differ materially from those predicted as a result of numerous known and unknown risks, uncertainties, and other factors, many of which are beyond the control of the Company. Some of those important factors, but certainly not all, that could cause actual results to differ materially from those indicated by such forward-looking statements are: (i) that the information is based on estimated results; (ii) the possible unavailability of financing; (iii) lack of resources to fund growth; (iv) cost reductions in future periods being less significant than the annualized amount calculated based on prior periods; (v) start-up risks associated with new lines of business and product lines; (vi) general operating risks; (vii) dependence on third parties; (viii) changes in government regulation; (ix) the effects of competition; * dependence on senior management, (xi) the impact of Canadian and/or
SOURCE
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