AND DECLARES QUARTERLY DIVIDEND
TORONTO, Aug. 13, 2020 /CNW/ - Pivot Technology Solutions,
Inc. (TSX: PTG), ("Pivot", "Company"), a full-service
information technology provider, today announced financial results
for the three and six months ended June 30,
2020. All figures are in Canadian dollars unless otherwise
stated.
Prior to January 1, 2020, the
Company reported its results in U.S. dollars. Effective
January 1, 2020, Pivot's Board of
Directors elected to change the Company's presentation currency
from U.S. dollars to Canadian dollars. The change in presentation
currency is to improve investors' ability to compare the Company's
financial results with other Canadian publicly traded
businesses.
SECOND QUARTER OVERVIEW
- Revenue was $332.1 million,
compared to $459.9 million in Q2
2019.
- Pivot Provided Services revenue grew 12.1%.
- Gross profit margin improved to 15.1%, compared to 13.1% in Q2
2019.
- Gross profit was $50.2 million,
compared to $60.1 million in Q2
2019.
- Selling, general and administrative expenses ("SG&A")
declined 9.3% to $42.8 million,
compared to $47.2 million in Q2
2019.
- Adjusted EBITDA(1) was $7.4
million, compared to $12.9
million in Q2 2019.
- Diluted earnings per share ("EPS") was ($0.01) in Q2 2020, compared to $0.05 in Q2 2019.
- The Company repurchased 497,260 shares during the quarter at a
cost of $0.7 million.
- The Company paid dividends of $1.5
million during Q2.
1 Non-GAAP
Measure. See the Non-GAAP Measures section of this news
release.
|
"The second quarter of 2020 was highlighted by economic
uncertainty as the world adapted to the challenges presented by
COVID-19. Pivot entered this environment from a position of
strength, with an efficient cost structure, a strengthened balance
sheet, and a strategy to grow its service and higher margin product
solutions," said Kevin Shank,
CEO.
"During the second quarter, we continued to execute against our
strategic plan. We are pleased that our results demonstrated the
expected benefits from the transformation plan that was initiated
in 2018. Pivot Provided Services continued on its growth path
and grew 12.1% in the second quarter compared to the prior year and
increased sequentially. These results would have been even
better were it not for COVID-19, as we had several projects delay
where we were unable to access customer locations due to the
pandemic. Gross profit margin increased to 15.1% from 13.1% and our
SG&A decreased by 9.3% compared to last year. The improved
efficiency of our business and growth in Pivot Provided Services
enabled us to generate $7.4 million
dollars in Adjusted EBITDA in the second quarter."
"Revenue declined compared to last years Q2, which was the
strongest quarter for the Company in fiscal 2019, due to three
factors: Revenue from major customers declined approximately
$71.5 million; the prior year
included a non-recurring project with a non-major customer of over
$41.0 million; and over $30.0 million of revenue slipped from Q2
2020 into Q3 2020 as a result of customer delays and product
shipment delays due to supply chain issues, both caused by
COVID-19."
"We continue to focus on building our core products and services
portfolio while enhancing our services and solutions capabilities
from the edge to the cloud. Intel continues to be a key
partner on our overall edge strategy to drive the sale, deployment,
and management of edge solutions. During the second quarter,
we were chosen as the Intel 2020 National Go-to-Market Partner of
the Year for our work with Intel's Smart Edge solution. This
award validates our expertise in delivering transformative services
that are moving us closer to our goal of becoming the number one
edge services provider in North
America."
Q2 2020 BUSINESS AND OPERATING HIGHLIGHTS
- In June 2020, the Company entered
into an interest rate swap contract, with a notional amount of
US$50.0 million, to lock in the LIBOR
rate between 0.34% and 0.7%, covering the full term of the
Company's credit facility, scheduled to expire May 14, 2024.
- The Normal Course Issuer Bid ("NCIB") was utilized to
repurchase 497,260 shares during the second quarter at a cost of
$0.7 million.
- Awarded Intel's 2020 National Go-to-Market Partner of the Year
award.
- The Company paid dividends of $1.5
million during Q2 2020.
DIVIDEND
On August 11, 2020, the board of
directors declared a dividend of C$0.04 per share payable on September 15, 2020 to common shareholders of
record on August 31, 2020. This
dividend has been designated as an "eligible dividend" for Canadian
tax purposes.
SECOND QUARTER RESULTS SUMMARY
Second quarter 2020 revenue was $332.1
million, a 27.8% decrease from the comparative period. This
decrease was primarily attributable to lower product sales to major
customers, the prior year included a non-recurring project with a
non-major customer of over $41.0
million, partially offset by an increase in Pivot Provided
Services. Over $30.0 million of revenue slipped from Q2
2020 into Q3 2020 as a result of customer delays and product
shipment delays due to supply chain issues, both caused by
COVID-19.
Gross profit of $50.2 million
for Q2 2020 decreased by $9.9 million or 16.5% as compared to the
same period in the prior year. The gross profit margin was 15.1% in
Q2 2020 as compared to 13.1% in Q2 2019. The decrease in gross
profit for Q2 2020 is mainly driven by the decline in sales
described above, partially offset by improved gross profit margin.
During the first half of 2020, the continued favourable shift
in the customer mix resulted in a lower percentage of revenue being
generated from major customers, which improved overall gross profit
margins. Since the gross profit margin from non-major customers is
generally more favourable, Q2 2020 and the first half 2020 gross
profit margins continued to benefit from this shift. In
addition, the growth in Pivot Provided Services revenue, which
generally has higher gross profit margins than product sales,
combined with continued cost management, contributed to the
improvement in gross profit margin in Q2
2020.
SG&A of $42.8 million for
Q2 2020 decreased $4.4 million
or 9.3% as compared to the same period in the prior year. Excluding
the unfavourable foreign exchange effect of $1.5 million, the decrease was $5.9 million or 12.5%. There were a number
of factors that impacted SG&A including: lower commissions and
variable compensation; cost reductions due to the sale of the Smart
Edge business in late 2019; increased costs due to investment in
growth areas which have been mostly offset by cost reductions from
integration activities and furlough actions; and decreased costs
associated with timing of events, travel and marketing spend
primarily as a result of COVID-19, partially offset by increased
bad debt expense.
Adjusted EBITDA(1) was $7.4
million in the 2020 second quarter. Net loss
attributable to shareholders was $0.5 million, or $0.01 per share. Net loss includes
$2.8 million of amortization of
intangibles from acquisitions.
OUTLOOK FOR 2020
While the global economy continues to be impacted by the
COVID-19 pandemic, it has affected industries in different ways.
While some customers have been negatively impacted, others have
seen an increase in demand. Independent of how a company is
performing, governments around the world have required that
non–essential offices be closed. Management has been able to
identify certain operations and resources that will be idle or less
utilized as a result of the COVID-19 pandemic. As a result, the
Company furloughed certain employees in April 2020, some of which have been brought back
as at June 30, 2020.
The Company's outlook is contained in its Management's
Discussion and Analysis ("MD&A") for the three and six months
ended June 30, 2020, which is
available at www.pivotts.com and at www.sedar.com.
SELECTED FINANCIAL INFORMATION AND OPERATING RESULTS
(unaudited)
|
Three months ended
June 30,
|
Six months ended
June 30,
|
(in thousands of
Canadian dollars, except per share amounts)
|
2020
|
2019
|
2020
|
2019
|
|
|
(re-presented,in
Canadian dollars)
|
|
(re-presented,in
Canadian dollars)
|
Revenue
|
332,136
|
459,902
|
708,943
|
849,763
|
Cost of
sales
|
281,947
|
399,797
|
606,664
|
740,967
|
Gross
profit
|
50,189
|
60,105
|
102,279
|
108,796
|
Selling, general and
administrative expenses
|
42,787
|
47,166
|
89,486
|
91,417
|
Income before
depreciation and amortization, finance expense, change in
fair value of
liabilities and
other expenses
|
7,402
|
12,939
|
12,793
|
17,379
|
Depreciation
|
1,679
|
2,042
|
3,690
|
4,115
|
Amortization
|
2,839
|
2,935
|
5,519
|
5,857
|
Finance
expense
|
1,497
|
2,018
|
3,241
|
4,234
|
Change in fair value
of liabilities
|
671
|
279
|
680
|
587
|
Other
expenses
|
1,747
|
1,124
|
2,194
|
5,269
|
Earnings (loss)
before income taxes
|
(1,031)
|
4,541
|
(2,531)
|
(2,683)
|
Income tax expense
(recovery)
|
(476)
|
3,199
|
(2,960)
|
1,292
|
Net income (loss)
for the period
|
(555)
|
1,342
|
429
|
(3,975)
|
Other
comprehensive income (loss)
|
|
|
|
|
Items that may be
reclassified subsequently to income (loss):
|
|
Exchange gain (loss)
on translation of foreign operations
|
(299)
|
(11)
|
868
|
(324)
|
Total
comprehensive income (loss)
|
(854)
|
1,331
|
1,297
|
(4,299)
|
Attributable
to:
|
|
|
|
|
Shareholders
|
(753)
|
2,123
|
1,211
|
(2,953)
|
Non-controlling
interest
|
(101)
|
(792)
|
86
|
(1,346)
|
Total
comprehensive income (loss)
|
(854)
|
1,331
|
1,297
|
(4,299)
|
Attributable to
shareholders:
|
|
|
|
|
Earnings (loss)
attributable to shareholders
|
(454)
|
2,134
|
343
|
(2,629)
|
Earnings (loss) per
common share
|
|
|
|
|
Basic
|
($0.01)
|
$0.05
|
$0.01
|
($0.07)
|
Diluted
|
($0.01)
|
$0.05
|
$0.01
|
($0.07)
|
Certain
comparative information has been reclassified to conform to current
year presentation.
|
The following is a summary of selected consolidated financial
information for the past eight quarters.
|
|
|
|
|
|
|
|
|
|
|
(in thousands of
Canadian dollars
|
2020
|
|
2019
|
|
2018
|
except otherwise
noted)
|
Q2
|
Q1
|
|
Q4
|
Q3
|
Q2
|
Q1
|
|
Q4
|
Q3
|
|
|
|
|
(re-presented in
Canadian dollars)
|
Revenue
|
332,136
|
376,807
|
|
402,477
|
352,404
|
459,902
|
389,861
|
|
395,872
|
417,094
|
Gross
profit
|
50,189
|
52,090
|
|
56,646
|
52,209
|
60,105
|
48,691
|
|
56,063
|
53,208
|
Gross profit
margin
|
15.1%
|
13.8%
|
|
14.1%
|
14.8%
|
13.1%
|
12.5%
|
|
14.2%
|
12.8%
|
Adjusted
EBITDA(1)
|
7,402
|
5,391
|
|
9,868
|
8,319
|
12,939
|
4,440
|
|
6,271
|
5,424
|
Adjusted
EBITDA(1) margin
|
2.2%
|
1.4%
|
|
2.5%
|
2.4%
|
2.8%
|
1.1%
|
|
1.6%
|
1.3%
|
Net income
(loss)
|
(555)
|
984
|
|
21,676
|
501
|
1,342
|
(5,317)
|
|
(34)
|
(3,204)
|
Net income (loss)
attributable
to shareholders
|
(454)
|
797
|
|
21,574
|
(413)
|
2,134
|
(4,763)
|
|
570
|
(3,638)
|
Earnings (loss) per
share
attributable to
shareholders:
|
|
|
|
|
|
|
|
|
|
|
Basic
|
($0.01)
|
$0.02
|
|
$0.55
|
($0.01)
|
$0.05
|
($0.12)
|
|
$0.01
|
($0.09)
|
Diluted
|
($0.01)
|
$0.02
|
|
$0.54
|
($0.01)
|
$0.05
|
($0.12)
|
|
$0.01
|
($0.09)
|
Cash dividends
declared on
common shares
|
1,529
|
1,556
|
|
1,585
|
1,586
|
1,579
|
1,579
|
|
1,579
|
1,579
|
Certain
comparative information has been reclassified to conform to current
year presentation.
|
The following is a reconciliation of "income (loss) before
income taxes" to "Adjusted EBITDA".
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
(in thousands of
Canadian dollars)
|
Q2
|
Q1
|
|
Q4
|
Q3
|
Q2
|
Q1
|
|
Q4
|
Q3
|
|
|
|
|
(re-presented in
Canadian dollars)
|
Income (loss)
before income taxes
|
(1,031)
|
(1,500)
|
|
29,622
|
506
|
4,541
|
(7,224)
|
|
840
|
(2,920)
|
Depreciation
|
1,679
|
2,011
|
|
1,805
|
1,970
|
2,042
|
2,073
|
|
757
|
825
|
Amortization
|
2,839
|
2,680
|
|
2,771
|
2,893
|
2,935
|
2,922
|
|
2,914
|
2,915
|
Finance
expense
|
1,497
|
1,744
|
|
1,841
|
1,922
|
2,018
|
2,216
|
|
1,989
|
1,997
|
Change in fair value
of liabilities
|
671
|
9
|
|
725
|
294
|
279
|
308
|
|
301
|
293
|
Other expenses
(income)
|
1,747
|
447
|
|
(26,896)
|
734
|
1,124
|
4,145
|
|
(530)
|
2,314
|
Adjusted
EBITDA(1)
|
7,402
|
5,391
|
|
9,868
|
8,319
|
12,939
|
4,440
|
|
6,271
|
5,424
|
Certain
comparative information has been reclassified to conform to current
year presentation.
|
Key metrics on consolidated debt
Adjusted Debt
|
|
|
|
June 30,
|
December 31,
|
(in thousands of
Canadian dollars)
|
2020
|
2019
|
Current
liabilities
|
494,060
|
492,330
|
Other financial
liabilities – long-term
|
14,207
|
14,999
|
Less: Lease
obligations – total
|
(18,330)
|
(18,769)
|
Less: Current
assets
|
(415,641)
|
(415,626)
|
Adjusted
Debt(1)
|
74,296
|
72,934
|
Adjusted Debt(1) normalizes the impact of the changes
in working capital. Management believes it is a more relevant
indicator of the Company's debt position and is a more comparable
metric with industry peers. The increase of Adjusted
Debt(1) in 2020 was mainly due to foreign exchange;
excluding the foreign exchange effect, Adjusted Debt was
$71.1 million as of
June 30, 2020.
The Company has financed its operations through an asset-based
revolving credit facility as opposed to term debt or equity in
order to take advantage of lower borrowing costs and flexibility
that the facility allows to match the cash flow requirements of the
Company. While the facility matures in May 2024, the borrowings under the facility are
presented as current liabilities.
Below are the key metrics of our consolidated debt as of
June 30, 2020, and December 31, 2019.
|
|
|
|
June 30,
|
December 31,
|
|
2020
|
2019
|
Adjusted
Debt(1) to Adjusted EBITDA(1)
|
2.40
|
2.05
|
Net interest
coverage(1)
|
4.42
|
4.45
|
Net interest
coverage is defined as Adjusted EBITDA divided by finance expense
on a trailing twelve-month basis.
|
The change in Adjusted Debt to Adjusted EBITDA at June 30, 2020 was due to the decline in Adjusted
EBITDA in Q2 2020 compared to Q2 2019, and also due to foreign
exchange; excluding the foreign exchange effect, Adjusted Debt to
Adjusted EBITDA was 2.32 as at June 30,
2020. The decline in net interest coverage reflects the
lower Adjusted EBITDA, partially offset by lower net finance
expense as at June 30, 2020 on a
trailing 12-month basis as compared to the same trailing 12-month
period at December 30, 2019.
NON-GAAP MEASURES
The Company evaluates and measures its performance based on
measures referred to as "Adjusted EBITDA", "Adjusted Debt",
"Adjusted Debt to Adjusted EBITDA", and "Net Interest Coverage".
These measures do not have any standardized meaning prescribed by
GAAP and, therefore, may not be comparable to similar measures
presented by other issuers. Such non-GAAP measures should not be
considered in isolation or as a substitute for measures of
performance prepared in accordance with GAAP such as net income
(loss), cash flow, or other measures of financial performance and
liquidity reported in accordance with GAAP. Detailed descriptions
of these terms can be found in Pivot's disclosure documents,
including its Management's Discussion and Analysis, filed with the
securities regulatory authorities; these documents are available at
www.sedar.com or on Pivot's website www.pivotts.com.
SECOND QUARTER CONFERENCE CALL
At 8:30 a.m. Eastern Time,
August 14, 2020, the Company will
host a conference call featuring management's quarterly remarks and
a follow-up question and answer period with analysts. The
conference call can be accessed live by dialing (416) 764-8659 five
minutes prior to the scheduled start time.
A telephone recording of the call will be available for one week
(until midnight August 21, 2020) by
dialing (416) 764-8677 and entering passcode 555002 followed by the
number sign.
ABOUT PIVOT TECHNOLOGY SOLUTIONS
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 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 release contain forward-looking
statements, including statements concerning anticipated financial
events, results, performance or expectations relating to the
Company operations, financial condition, business strategy and the
Company's outlook for the IT market and its business in 2020, and
the impact of the COVID-19 pandemic on the Company's results of
operations. Forward-looking statements are based on
assumptions of future events that the Company believes are
reasonable based upon information currently available, including
the impact that COVID-19 pandemic may have on the Company and the
IT market in the near future; the Company's ability to mitigate
possible supply chain disruption and delays or interruptions in
services provided to customers. Pivot assumes no obligation
to update or revise any forward-looking statement, except as
required by applicable securities law. These
statements are not guarantees of future performance and involve
known and unknown risks, uncertainties and other factors, including
that the COVID-19 pandemic will result in a more significant
deferral or cancellation of new orders for goods and services than
anticipate. Actual results could vary significantly
from those expressed or implied in these statements. Readers
are cautioned that assumptions used in the preparation of such
information may prove to be incorrect. Further information with
respects to the risks and uncertainties can be found in the
MD&A for the three and six months ended June 30, 2020 and
the Annual Information Form for the year ended December 31, 2019, available at
www.sedar.com and on Pivot's website at
www.pivotts.com.
SOURCE Pivot Technology Solutions, Inc