Converge Solutions (CTS) Q3 2024 earnings summary

Executive summary

• Q3 2024 results were impacted by lower demand in North America and macroeconomic headwinds, leading to revenue of $630.7M (down 11.2% y/y), gross sales of $945M (down 8.9% y/y), and adjusted EBITDA of $32.1M (down 22.2% y/y).

• Strategic investment areas—AI, cloud, and cybersecurity—grew double digits in Q3, driving resilience in key growth segments.

• Cash from operating activities in Q3 was $48.9M, with year-to-date cash flow at $212M, supporting net debt reduction and $61.7M in capital returned to shareholders.

• CEO transition completed ahead of schedule, with Greg Berard appointed to the board.

• Year-to-date net loss increased to $171.8M, mainly due to a $176.1M non-cash impairment charge on the Germany segment.

Financial highlights

• Q3 gross sales were $945M, down 8.9% year-over-year; IFRS revenue was $630.7M, down 11.2% year-over-year.

• Gross profit was $158.3M, down 9.1% year-over-year; gross margin improved to 25.1%.

• Adjusted EBITDA was $32.1M, down 22.2% year-over-year; adjusted EBITDA margin on gross profit was 20.3%.

• Adjusted net income for Q3 was $23.2M (EPS $0.12); year-to-date adjusted net income was $84.7M (EPS $0.42).

• Net debt reduced by $81.9M since Q4 2023, now at $127.8M; leverage ratio below 1.0x.

Outlook and guidance

• FY 2024 revenue guidance is $2,511–$2,558M, gross profit $678–$691M, and adjusted EBITDA $155–$166M.

• Q4 2024 guidance: revenue $600–$646M, gross profit $165–$178M, adjusted EBITDA $36–$47M.

• Market conditions expected to remain uncertain through 2024, with cautious customer sentiment and delayed hardware spending.

• Optimism for 2025 driven by expected device refresh cycle, Windows 11 upgrade, and continued growth in AI, cloud, and cyber.

• Management expects to close remaining delayed hardware deals in Q4 and 2025.