Softchoice Corporation

Good morning. My name is Marcella, and I will be your conference operator today. At this time, I'd like to welcome everyone to the SoftChoice Q4 2022 Earnings Conference Call. I would now like to turn the conference over to Mr. Tim Foran, Investor Relations. Please go ahead.

Thank you, Marcella, and good morning, everyone. Welcome to SoftChoice's Q4 and Fiscal 2022 Conference Call for the period ended December 31, 2022. A reminder, for that purpose of the recording, today is Thursday, March 9th, 2023. I'm joined today by Vince DePalma, SoftChoice's CEO, Andrew Caprera, President and COO, and Yota Skateridis, Interim CFO. After prepared remarks, we will open it up for analyst questions. The company will make forward-looking statements on our call today that are based on assumptions and therefore subject to risks and uncertainties that could cause the actual results to differ materially from those projected. Company undertakes no obligation to update these statements, except as required by law. You can read about these risks and uncertainties in our earnings press release today, as well as in our filings with Canadian Securities and Regulatory. Also, our commentary today will include adjusted financial measures, which are non-IFRS measures. These should be considered as a supplement to and not a substitute for IFRS financial measures. Reconciliations between the two and relevant disclaimers can be found on the company's MD&A, which is available on our website. And finally, please note that the company reports in U.S. dollars. Therefore, all amounts discussed today are in U.S. dollars unless otherwise indicated. With that, I will now turn the call over to Vince.

Thank you, Tim, and welcome, everybody. In today's call, I will start by providing highlights of the year and then for Q4. I'll then pass it to Andrew, who will provide an update on progress against our growth strategy. and how we are utilizing our go-to-market strategy to deepen engagements with our expanding customer base. Andrew will then turn it over to Yoda for a deeper dive on our financial performance and 2023 capital allocation plans. And then finally, I will wrap it up with an overview of our 2023 priorities before we open it up to analyst Q&A. So I'll start on slide four of the presentation for those of you following us online. unless otherwise noted, percentage growth rates that we refer to today are for the identified period of 2022 compared to the prior comparator period in 2021. So first off, we recorded strong results from our operations in fiscal 2022, including approximately 10.5% growth in our top line gross profit on a constant currency basis. In terms of geographic split, the U.S. represented a healthy majority of overall gross profit, reflecting the relative size of the market compared to Canada. Additionally, U.S. growth was slightly higher than in Canada, benefiting from our initiatives to grow our share of wallet in what is a large and growing market. Across the two countries, we estimate that we continue to take market share in 2022, based on our constant currency growth rate being above the healthy growth in IT spend estimated by Gartner. Due to the natural operating leverage in our business model, the increase in our gross profit drove an 18% growth in our adjusted EBITDA, while also offsetting significant growth investments we made during the year. Bottom line, profit margins expanded and adjusted net income increased 34%. Our earnings per share also benefited from share buybacks we completed during the year, notably in the second half. After the growth investments we made in the business, our adjusted free cash flow increased 21% in 2022, and we used it to enhance returns to our shareholders. In 2022, we increased our regular quarterly dividend, and today we announced an approximately 22% increase in this dividend to 11 cents Canadian per share from 9 cents. Additionally, over the past year, we bought back and canceled 2.9 million of our shares, and today we announced we will renew our share buyback program. In terms of the demand environment for our core IT solutions, gross profit growth continued to be driven by our software and cloud solutions, notably by strong growth in our public cloud and security software solutions. In 2022, software and cloud comprised about 85% of the growth in our gross profit as organizations continue to leverage the cloud and focus on improving the security of their IT environments. Customer demand for our IT solutions outside of a handful of enterprise customers in Q4, which I will discuss in a minute, was strong across all of our sales channels in 2022. Finally, we executed successfully in 2022 on our growth strategy. We expanded significantly on our frontline sales force. Driven in part by these headcount investments, we increased the size of our customer base. We also continued to invest in sales specialists and technical teams supporting our frontline sales force. And these investments drove record gross profit per customer and a revenue retention rate of 106%. Turning to slide five, we provide an overview of the fourth quarter of 2022. Specifically, during the quarter, our Q4 growth in constant currency was negatively impacted by a decline in hardware sales, reflecting industry trends and not unexpected for us considering the current macroeconomic environment, as we indicated on our last earnings call. We also experienced a decline in sales in December to a handful of our large enterprise customers. They remain important customers for us. However, back in Q4 of 2021, we benefited from some large hardware and software and cloud solution purchases from these customers, which helped drive an exceptional 31% year-over-year increase in gross profit in that period, which created a very tough comp for us in Q4 of 2022. Now offsetting this was continued strong growth across the rest of our customer base. So when you exclude these few enterprise customers that I just referenced, we experienced approximately 10.5% constant currency growth in gross profit across our remaining customer base of almost 4,800 customers. And we experienced healthy growth across all three sales channels, and driven by double-digit growth in our software and cloud solutions. Positively, despite less than anticipated gross profit, we continue to drive strong growth in our profitability, including an approximate 19% increase in our adjusted EBITDA and adjusted earnings per share. With that, I'll now turn it over to Andrew.