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 2024. As a reminder, all participants are in a 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 the star, then the number one on your telephone keypad. Should you need assistance during the conference, you may signal an operator by pressing star zero. I would now like to turn the conference over to Dennis Fong, Converge Investor Relations. Please go ahead.

Thank you, operator, and good morning. Joining me on the call today to discuss Converge's Q3 2024 results are Greg Berard, Chief Executive Officer, and Abhijit Kamboj, Chief Financial Officer. This call is being recorded live at 8 a.m. Eastern Time on November 12, 2024. 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 are available for review on CDAR+. Please note that some statements made on the call today may be forward-looking. Actual events or results may differ materially from those expressed or implied and converge to squint 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 in both our MD&A and press release, as well as 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 before, we will also discuss non-GAAP performance measures, which should be viewed as supplemental. The MD&A contains definitions on each one used in our reporting. All the dollar figures expressed in this call are Canadian unless otherwise noted. I'll now turn it over to Greg to begin with opening remarks, providing a high-level summary of our Q3 results and business overview for the quarter. Abhijit will dive further into the financial details of our Q3 results and provide a note for Q4 before we wrap it up and take your questions. With that, Greg.

Thank you, Dennis. Good morning and good afternoon to those of you joining from overseas. Welcome to our third quarter 2024 results call. In what follows, I will provide a business update on the quarter, beginning with high-level financial highlights. I will then provide an update on our partnerships and our key practice areas and share a few examples of customer success stories that illustrate how we are continuing to drive value with our clients and acting as their trusted advisor. I will also speak to current market conditions and provide an outlook on our longer-term objectives. Following my remarks, Abjit Kamboj will provide a more detailed review of the third quarter financials, discuss our capital allocation priorities, and a forecast for the remainder of fiscal year 2024. As announced in our press release this morning, the previously discussed Group CEO transition plan has progressed ahead of schedule, and the Board has accepted Shawn Mayne's decision to step down as Group CEO. I will continue my role as CEO of Converge, and effective today, I have been appointed as a member to the company's board of directors. I would like to thank Sean and the board for their continued confidence and support, and I look forward to the incredible future ahead built on the strong relationships with our clients and partners, combined with our deep technical capabilities we've amassed across all of our key practice areas, all supported by our strong operating and financial discipline. With that, let me begin by reviewing the highlights for the quarter. As reported in our Q3 preliminary release on October 24th, our financial results were affected by lower demand in North America. This was a result of macroeconomic factors that delayed project spending in the final weeks of the quarter, specifically around our data center and device business, leading to results that fell below our guidance range. However, I will reiterate that our strategic investment areas around AI, cloud, and cyber all grew double digits in Q3. I will address the factors that impacted the overall quarter, but first and foremost, I want to emphasize that our business fundamentals remain strong. In Q3, we generated $48.9 million in cash from operating activities with $32.1 million in adjusted EBITDA. This represents a 152% cash conversion from adjusted EBITDA to operating cash flow. During the quarter, we also returned 10 million in capital to shareholders through our NCIB share repurchases and dividends. From a cash flow standpoint, this was a continuation of what we have done throughout the year. Year to date, the business has generated 212 million in cash from operating activities, an 85% year-over-year increase. With this cash, We have reduced our net debt position by $82 million since the beginning of the year and $180 million since Q3 of 2023. In addition, we have returned $61.7 million in capital to shareholders through dividends and share buybacks. Our financial results are supported by the immense value that we bring to our customers. We have generated over $3 billion of gross sales year-to-date with an organic growth rate of 2%, highlighting the sustained demand for Converge's comprehensive set of solutions. Our AIM strategy, advise, implement, and manage across all of our practice areas continues to put us in a position to deliver end-to-end solutions and services that validates the strength of our organic growth strategy and our ability to outperform other regional providers. As we review our Q3 business highlights, I want to emphasize our continued confidence in our model, our market position, and our strategy. It is our differentiated end-to-end service offerings and our deep relationship with our strategic partners that drives our financial engine, which allows us to reinvest and create long-term value for our shareholders. Converge takes great pride in our unique partner relationships that enable us to offer a world-class portfolio of solutions. The combination of our AIM strategy, our deep technical expertise, and our strategic partnerships is what makes us unique in the marketplace, providing a competitive edge amongst peers. The industry recognitions achieved both recently and throughout the year continue to underscore the success we are seeing across our practice areas. It is the combination of our technical expertise and trusted advisor status that gives us the ability to drive the right solutions and value with our clients. We are proud to have been recognized as a CRN Triple Crown Award winner for the third consecutive year. This prestigious award honors companies who have been named to three of CRN's most distinguished lists. The Solution Provider 500, which ranks the largest IT solution providers in North America by revenue. The Fast Growth 150, which highlights the fastest growing IT companies, and the Tech Elite 250, which recognizes those with the highest level certifications from the top technology vendors. This continued recognition reinforces Converge as a leading player in the IT industry and a trusted global technology partner. Just last week, I participated in the 2024 Ingram Micro One Innovation Center held in Maryland. where I had the opportunity to engage with industry leaders and esteemed partners. I was part of a panel with NVIDIA and Ingram talking about the value of AI partnerships and how our unique skills help position us for the growth expected around AI deployments and growth in AI workloads. We talked about the success we've had around high-performance compute, but also discussed the importance of focusing on building new industry solutions and replatforming existing ones which enables us to optimize, scale, and manage AI workloads for our clients. Also, at the event, Converge was honored to receive Ingram Micro's Solution Partner of the Year for North America. Ingram is a longstanding top partner of Converge and a leading technology company in the global IT ecosystem, with a vast reach that extends to nearly 90% of the world's population. Our designation as this year's Solution Partner of the Year is a testament to our growth as a company, our investments in driving growth around AI, cloud, and cyber, and our consistent ability to deliver groundbreaking solutions to our customers alongside Ingram Micro. This recognition further highlights the strength and depth of our partnerships, which are a key driver of our success. One question we often receive from investors is regarding our partner diversification strategy. We have over 1,000 partner relationships, enabling us to meet our customers' diverse end-to-end IT solution needs. It is important to note that no single vendor accounts for more than 10% of our gross sales, which is a direct reflection of the strength and resilience of our diversified partner ecosystem. While the composition changes from year to year based on our customer investments, It's the breadth of our capabilities across product lines that builds reoccurring long-term relationships with our top clients. All of this provides diversification across our partner base and makes our business a strong indicator of the current industry trends in IT spending. As a result of this diversification, we are able to deliver targeted solutions through our AIM strategy. which is uniquely designed around our deep expertise in our core practice areas and our go-to-market strategy around advanced analytics and artificial intelligence, application modernization and cloud platforms, cybersecurity, and data center solutions. These solutions cover our customers' end-to-end IT needs, including key areas where IT budgets are shifting, allowing us to continue to drive growth in our strategic investment areas. In North America, we continue to see the power of our practice areas as we accelerate discussions with our clients on driving higher value solutions. This is positioning Converge for larger enterprise-level opportunities through our unique internal expertise and ever-expanding capabilities. As a result, in the third quarter, we also added another 119 net new logos and saw a double-digit growth in our key strategic practice areas, driving the growth around our software and managed services revenue. The growth in managed services in Q3 was driven by demand for our IP4G solution in partnership with IBM and Google, our infrastructure as a service offerings, and our 24 by 7 help desk solution. We are committed to continuing to diversify our business across our vertical practices while continuing to drive greater penetration of higher value professional and managed services. As we have done over the past few years, we will continue to invest in new offerings, new partnerships, and new solutions that drive value for our clients. This strategic approach will undoubtedly increase our wallet share from customers, but also help to fortify our position against future market fluctuations. To highlight the value we continue to prioritize and deliver for our clients, we secured several wins in Q3 that showcase our role as a trusted advisor and demonstrate our commitment to providing higher value solutions. One notable case involved our cloud and managed services team engagement with a global human resources company that partnered with Google to move from traditional IT infrastructure to a cloud-first approach with a goal of moving all of their North American applications to Google Cloud. As a trusted IBM and Google partner, Converge was chosen to help migrate their Oracle systems to the IBM Power for Google Cloud platform. We effectively provided deployment, migration, and project leadership services, securing a five-year IP4G subscription for development, production, and DR workloads across two U.S. regions, and also added a five-year AIX and backup managed services contract. This is a great example of showing how our IP4G solution can help us expand both our professional and managed services business. Another example of our teams working together across practices and driving value around their cybersecurity needs is the work we did with a large healthcare insurer. They were facing challenges of technical debt, user experience issues, and stringent security requirements. With the end goal to re-platform their portals and use a solution that met modern identity standards and could be managed by their MSP, they partnered with our converged cybersecurity team. We implemented a modern customer identity and access management solution using Okta's Customer Identity Cloud, enhancing user experience and increasing security with advanced attack prevention and multi-factor authentication. Through our professional services and cyber team, we will continue to work toward enabling commercial members across their portfolio of applications and to migrate and consolidate their providers, their brokers, and their employers to the Okta platform. Lastly, we worked with a leading nonprofit health and well-being organization ranked among the top health plans in the U.S., serving over 2 million members. They came to us wanting to improve how they share patient information between systems, meet healthcare data sharing regulations, and build a modern infrastructure for real-time data exchange between their on-premise systems and the cloud. By leveraging our professional services teams across our key strategic practices and our expertise in application modernization and cloud integration, our teams helped create a customized solution that reduced risk, accelerated the project, and established Converge as a trusted partner for similar healthcare initiatives. This is just another example that shows the power of our converged strategic investments combining the power of our AI application modernization and cloud teams. As you've seen in the example shared today, we have had great success in delivering impactful solutions for our clients. Each of these stories reflects our commitment to providing tailored solutions that meet our clients' unique needs. And these are just a few examples that continue to underline how our AIM strategy is working and we will continue to be the trusted advisor for our clients delivering high-value solutions. Before handing the call over to Abjit for a detailed financial review, I'd like to provide some additional commentary on our Q3 sales performance in the current market environment. We conducted a thorough analysis of our sales funnel from the bottom up and identified all the key deals that slipped from our Q3 forecast. We saw a larger amount of elongated customer decision-making and delays in projects. This was unusual and something we haven't seen in recent quarters, and it supports our view that the weakness was spread across a fairly wide range of customers that were exhibiting increased caution across the IT industry. On the customer side, we observed procurement becoming more involved in purchases, which slowed down deal velocity across the data center and device business. Since the end of September, we continue to track and monitor all the deals that have pushed and The good news is we've closed about a quarter of these deals in Q4 already, and we expect the remaining deals to be pushed into late Q4 and some into 2025. We also achieved a major milestone for the company with the successful implementation of our new ERP system that went live in North America in October, with the full completion expected in 2025. As we continue to optimize the ERP system, it will increase the velocity of information across our business. This visibility will continue to allow us to be more data driven, and we will look to accelerate the benefits achieved in the coming quarters. We are committed to our long-term investment plan, driven by our focus on organic growth and our continued investments in new sellers and strategic technical hires. Our goal for 2024 was to target 10% annual growth in our seller base, and we have added over 30 new sellers in 2024. We also remain focused on improving profitability by continuing to drive higher value solutions and the right optimization across the business, aiming for 30% adjusted EBITDA conversion from gross profit over the next three years. We are growing our team, boosting efficiency, and fostering a strong company culture that emphasizes focus, accountability, collaboration, and execution. Our leaders fully embrace these core values, empowering our teams to implement strategic initiatives decisively and drive long-term success for our clients and shareholders. We remain steadfast in our commitment to our long-term goals, and we are confident in our ability to reach them as we continue to execute and invest in the right strategic areas for our clients, our employees, and our shareholders. With that, I will now pass the line to FG to review the details of our Q3 and year-to-date financial performance.