Converge Solutions (CTS) Q2 2024 earnings summary

Executive summary

• Achieved fourth consecutive quarter with over $1.06 billion in gross sales, up 11.1% year-over-year in Q2 2024, and gross profit rose 2.1% to $179.3 million.

• Adjusted EBITDA increased 8.6% to $45.1 million; adjusted net income was $38.8 million, with adjusted EPS of $0.19.

• Net loss of $165.0 million to $172.6 million in Q2, primarily due to a $176.1 million non-cash impairment charge in Germany.

• Returned $47.4 million to shareholders in Q2 through dividends and share repurchases; net debt reduced by $194 million year-over-year.

• Leadership transition: Group CEO role to be eliminated; Greg Berard to assume all executive responsibilities in 2025.

Financial highlights

• Q2 2024 gross sales: $1.06 billion, up 11.1% year-over-year; gross margin improved to 27.5%.

• Adjusted EBITDA: $45.1 million, up 8.6% year-over-year; adjusted EBITDA as % of gross profit: 25.2%–26.5%.

• Adjusted net income: $38.8 million in Q2 2024, up from $25.1 million in Q2 2023.

• Cash from operating activities: $52.4 million in Q2, up from cash used of $9.6 million in Q2 2023.

• Net debt reduced to $157.9 million, down $194 million year-over-year; leverage ratio improved to 0.9x.

Outlook and guidance

• FY2024 revenue expected between $2.6–$2.7 billion; gross profit $709–$721 million; adjusted EBITDA $176–$184 million.

• Q3 2024 guidance: revenue $636–$658 million, gross profit $172–$178 million, adjusted EBITDA $43–$47 million.

• Growth expected to be low- to single-mid-digit for FY2024, outpacing industry peers.

• No recovery expected in Germany in 2024; UK and North America to perform relatively well.

• Large AI high-performance compute deal could boost results if closed in 2024.