Converge Technology Solutions Corp.

Thank you for standing by. This is the conference operator. Welcome to the Converge earnings call for the third quarter of 2023. As a reminder, all participants are in listen only mode and the conference is being recorded. After the call, there will be an opportunity to ask questions. To join the question queue, you may press star then one on your telephone keypad. Should you need assistance during the conference, you may signal an operator by pressing star and zero. I would now like to turn the conference over to Lorne Gorber, Converge Investor Relations. Please go ahead.

Thank you, Jerry, and good morning, everyone. Joining me to discuss Converge's Q3 fiscal 2023 results are Sean Main, Group CEO, Greg Berard, Global CEO and President, and Abhijit Kamboj, Chief Financial Officer. This call is being recorded live at 8 a.m. Eastern Time on November 14, 2023. The press release we issued earlier this morning is available for download along with our Q3 MD&A, financial statements, and accompanying notes, all of which have been filed and available for view on CDAR+. Please note that some statements made on the call may be forward-looking. Actual events or results may differ materially from those expressed or implied, and Converge disclaims any intent or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. The complete safe harbor statement is available both in our MD&A and press release, as well as on Converge.com. We encourage our investors to read it in its entirety. We are reporting our financial results in accordance with International Financial Reporting Standards, or IFRS. As always, we will discuss non-GAAP performance measures, which should be viewed as supplemental. The MD&A contains definitions of each one used in our reporting. All of the dollar figures expressed on this call are Canadian, unless otherwise noted. I'll turn it over to Sean to begin with a high-level overview of the past quarter. Then Greg will expand with some operations highlights, including client examples. And Abhijit will dive into our Q3 financial performance. before we conclude with the Q&A. So with that, Sean.

Thank you, Lauren. And welcome to those of you attending today's third quarter call. I would like to begin by providing financial highlights from our record results, which for the first time in our history, exceeded a billion dollars in gross sales, supported by significant organic growth, overall demonstrating ongoing demand for Converge's comprehensive set of solutions. Highlights discussed throughout today's call are undeniably linked to the continued demand for Converge's unique set of solutions, including high-performance computing delivered through our end-to-end advise, implement, and manage, or AIM strategy, allowing Converge to outperform its peers while acting as a trusted advisor in delivering unified and differentiated solutions to its clients. Let's begin with the main financial highlights from the past record quarter where gross sales grew 42% year-over-year to $1.04 billion. Notably, gross profit performance increased from $139.7 million to $174.1 million, or 24.7% year-over-year, while we reported significant third-quarter organic growth of 23.6%. A testament to the cash generation characteristics of the IT services space, Converge has continued to strengthen its balance sheet, specifically by reducing the company's net debt by $44.3 million from the previous quarter. In regards to backlog management, for which Greg will provide further details, our product backlog increased by $30 million from the end of the second quarter, demonstrating resiliency in demand. Expanding on financial highlights from a year-to-date perspective, the company's adjusted EBITDA grew 24% year-over-year to $124 million and $167 million in the past year. As mentioned, Converge significantly reduced net debt to a balance of $370.5 million, bringing our net debt to LTM adjusted EBITDA ratio to 1.84, which is under our target two times ratio. Cash generated from operating activities significantly increased by 80.9 million during the third quarter, bringing the company to 115.1 million of cash generated year-to-date. In addition to using cash to reduce debt, the company also this year made payments for acquisition-related consideration of 95.6 million, comprised of 20.8 million of contingent payments, 43.8 million for deferred consideration, and $31 million of non-controlling interest payments for its European acquisitions. Despite economic headwinds, it is ever more evident that the extent to which organizations are designating significant budgets to pressing IT needs in cybersecurity, advanced analytics, and overall digital transformation, all of which Converge actively pursues to become a top North American provider. While many industry providers have experienced declines in revenue, our organic growth profile directly demonstrates how the diversification of our offerings to these key areas has made Converge resilient to these trends. This was a key reason why we launched the Coffee and Converge series, which spotlights the depth of Converge's vast and unique offerings, which our Global Chief Executive Officer and President, Greg Berard, will expand upon.