Softchoice Corporation

Good morning. My name is Jenny, and I will be your conference operator today. At this time, I would like to welcome everyone to the SoftChoice First Quarter 2023 Earnings Conference Call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question and answer session. Instructions will be provided at that time for you to queue up for a question. If anyone has any difficulties hearing the conference, please press door zero for operator assistance at any time. I would like to remind everyone that this call is being recorded on Friday, May 12, 2023. I would now like to turn the conference over to Mr. Tim Foran, Investor Relations. Please go ahead, sir.

Thank you, Jenny, and good morning, everyone. Welcome to SoftChoices Q1 2023 conference call for the period ended March 31, 2023. I'm joined today by Vince DePalma, SoftChoice's CEO, Andrew Capera, 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. The 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 authorities. 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. Unless otherwise noted, percentage growth rates that we refer to today are for the identified period ending March 31st, 2023, compared to the same period ending March 31st, 2022. Finally, please note that because the company reports in U.S. dollars, 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 good morning, everybody. In today's call, I'll start by providing highlights of the quarter. I'll then pass it to Andrew, who will provide an update on the current demand environment and progress against our growth strategy. Andrew will then turn it over to Yoda for a deeper dive on our financial performance. And finally, we will open it up for analyst Q&A. I'll start on slide four of the presentation for those following online. First off, we recorded strong results from our operations in Q1 2023, including approximately 14% growth or $9 million in our top-line gross profit on a constant currency basis. Growth was led by software and cloud, which increased 24% or $10 million in constant currency. As we continue to prove our value to our growing customer base, by enabling their software-driven transformation and optimizing their IT spend. This reflects our software foundation and strategic focus on hybrid multi-cloud, collaboration in digital workplaces, software asset management, and security. In terms of the demand environment, we continue to see healthy demand for our core solutions across our SMB and commercial sales channels. which represent about 90% of our customer base. Excuse me. While we saw year-over-year gross profit growth among our enterprise customers, it was slower than in the SMB and commercial channels, which may reflect customers of this size being more cautious with spending in the uncertain macroeconomic environment. Broadly speaking, though, customer spend in SoftChoice's core focus areas remains mission critical and not discretionary across our target mid-market, and we have therefore continued to see healthy demand. Additionally, our services business has benefited from customers seeking to optimize their cloud spend. The strong demand for our software, cloud, and services solutions has enabled us to offset the reduction in hardware spend from our customers. The softening of hardware spend was not a surprise as hardware purchases tend to be more discretionary, as we outlined on previous calls. Q1 was also a strong quarter for SoftChoice's profits. The increase in our gross profit drove growth of 46% in our adjusted EBITDA, attributable to the natural operating leverage in our business model, combined with some prudent caution on spending in Q1 while we gauged how the year was starting out. Adjusted net income increased 54%, and adjusted EPS increased 71%, faster than bottom line profits due to the beneficial impact of the share buybacks we completed over the past year. On an LTM basis, gross profit increased approximately 12% on a constant currency basis. Adjusted EBITDA increased 26%. with the EBITDA margin as a percentage of gross profit increasing to 27 from 24%. I'll note that this margin expansion is the product not only of our operating leverage, but also due to an easier comparable in the prior LTM period due to the acceleration of investments we made in 2021 after a temporary hold during the pandemic in 2020. Adjusted free cash flow increased 29%, and after interest and taxes, we used it to enhance returns for our shareholders through an increased quarterly dividend and the implementation of a share buyback program. I'll now turn it over to Andrew.