The Globe and Mail

Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Globe Investor

News Sources

Take control of your investments with the latest investing news and analysis

Press release from Marketwire

Softchoice Increases Q1 Earnings on Strong Revenue Growth

Monday, May 10, 2010

Softchoice Increases Q1 Earnings on Strong Revenue Growth16:09 EDT Monday, May 10, 2010TORONTO, ONTARIO--(Marketwire - May 10, 2010) - Softchoice Corporation (TSX:SO), a leading North American provider of IT solutions and services, today reported financial results for the first quarter of 2010.For the three-month period ended March 31, 2010, Softchoice reported net earnings of US$4.5 million or US$0.23 per basic and fully diluted share, compared to a net loss of US$2.4 million or US$0.14 per basic and fully diluted share for the same period last year. Adjusting for foreign exchange gains/losses on the cash, inter-company debt and external debt denominated in a non-functional currency, earnings were US$2.9 million or US$0.15 per share (basic and fully diluted) compared to a loss of US$1.0 million or a loss of US$0.06 per share (basic and fully diluted) for the first quarter of 2009.During the quarter Softchoice reported revenue of US$282.7 million compared to revenues of US$218.3 million recorded for the same period last year, representing an increase of 30 percent. Revenue increased in Canada and the United States by 30 percent and 28 percent, respectively.Microsoft revenue increased by 56 percent in the quarter, due primarily to a single large transaction that was completed within the U.S. federal government sector. Sales of other software showed modest growth of six percent while hardware sales jumped by 26 percent over the same period last year."We are encouraged by the very positive reception that Windows 7 has received in the marketplace," said David MacDonald, President and CEO of Softchoice. "We believe that customers who delayed infrastructure refresh cycles are now considering the benefits of upgraded PC's and virtualization options which will improve Microsoft EA renewals going forward."Gross profit for the first quarter was US$36.4 million, representing an increase of 19 percent compared to gross profit of US$30.7 million reported in the first quarter of the prior year. Expenses as a percentage of revenue were 10 percent compared to 13 percent reported for the same period of the prior year, reflecting the results of the productivity and cost management activities that were undertaken in late 2008 and 2009. EBITDA increased from US$2.3 million in the first quarter of 2009 to US$7.3 million in the current period."The 224 percent growth in EBITDA goes to the heart of our business model which is structured to deliver a greater contribution to the bottom line from each additional dollar of revenue," added Mr. MacDonald. "Moreover, our solutions and services capability means that we are positioned to identify software and hardware transaction opportunities early in the planning and design stage which gives us a strong competitive advantage as the rebound in IT spending continues to take hold."Total debt of the Company was US$15.7 million and Softchoice had US$32.2 million in cash on hand at the end of the quarter. The reduction in debt of US$24.7 million compared to the end of the first quarter of the prior year is primarily a result of positive cash generated from earnings and the proceeds from the equity offering executed on November 20, 2009.First-Quarter Business Highlights -- For the fifth straight year Softchoice was named one of Canada's Best Workplaces by the Globe and Mail newspaper. -- At HP's America's Partner Conference Softchoice was given the Partner Excellence award for Philanthropy in recognition of the Company's efforts to support computer literacy by building computer labs at home and in developing nations around the world. -- For the fifth straight year Softchoice was named Canada's Top Solution Provider by Computer Dealer News magazine. -- At a recent conference, Softchoice was recognized as Trend Micro's Top Canadian Partner for 2009 thanks to strong revenue growth and the contributions the Company has made to Trend Micro's standing in the Canadian security market. First Quarter Conference Call DetailsSoftchoice will host a conference call and web presentation to review its first quarter earnings call the evening before on Monday May 10th starting at 5:00 pm EDT. The conference call will begin with a brief presentation followed by a question and answer period.416-800-1066 (Local / International)1-866-966-5335 (Toll Free)Webcast URL:http://events.snwebcastcenter.com/softchoice/20100511/To ensure participation, please dial in at least 10 minutes prior to the start of the conference at 5:00 pm EDT.For those unable to attend the call, a link will be made available on the Softchoice website to an archived web and audio version on May 11th, 2010.Annual General Meeting InformationSoftchoice will host its Annual General Meeting of Shareholders on Tuesday May 11, 2010.Located at 225 Front Street West in Toronto, the AGM will take place at the Intercontinental Hotel in Ballroom A in the lower lobby and will run from 10:00 am to 12:00 pm. Presenters will include Lawrence Tapp, Chairman of the Board for Softchoice, David MacDonald, Softchoice's President and CEO, and Chief Financial Officer, David Long.About SoftchoiceAs one of North America's leading providers of technology solutions and services, Softchoice helps businesses and organizations of all sizes to select, acquire and manage their software and hardware technology resources. Softchoice offers a full range of capabilities, including face-to-face consultations and IT asset management services designed to help customers save time, money and risk in IT procurement. Softchoice currently has 872 employees operating from more than 40 branch offices located in major cities across the U.S. and Canada. Softchoice stock is listed on the Toronto Stock Exchange (TSX) under the trading symbol "SO." The common shares of Softchoice are not registered under the U.S. Securities Act of 1933 and are not publicly traded in the United States.Forward-Looking StatementsThis press release contains forward-looking statements that involve risks and uncertainties. These forward-looking statements relate to expectations, intentions and plans contained in this press release that are not historical fact. When used in this press release, the words "anticipate," "expect," "will" and similar expressions generally identify forward-looking statements. These statements reflect our current expectations and are subject to a number of risks and uncertainties including, but not limited to, change in technology and general market conditions, many of which are set out or incorporated by reference in the Company's latest Annual Information Form. Due to the many risks and uncertainties, Softchoice cannot assure that the forward-looking statements contained in this press release will be realized. Softchoice Corporation Interim Consolidated Balance Sheets ---------------------------------------------------------------------------- (in thousands of U.S. dollars) (Unaudited) December March 31, 31, 2010 2009 (unaudited) ASSETS Cash $ 32,245 $ 18,601 Accounts receivable, net of allowance for doubtful accounts of $4,366 (December 31, 2009 - $3,967) 223,677 185,278 Inventory 2,669 1,151 Prepaid expenses and other assets 5,229 5,367 Future income taxes 2,537 2,270 ------------------------- Total current assets 266,357 212,667 ------------------------- Restricted cash 500 500 Property and equipment 6,457 6,894 Goodwill (note 3) 11,249 11,063 Intangible assets (note 3) 43,531 44,866 Long-term accounts receivable 167 303 Deferred costs 318 1,676 Future income taxes 16,205 16,220 ------------------------- Total non-current assets 78,427 81,522 ------------------------- Total assets $ 344,784 $ 294,189 ------------------------- ------------------------- LIABILITIES Term debt - current (note 4) $ 4,104 $ 4,104 Accounts payable and accrued liabilities 224,060 173,676 Current portion of deferred revenue 2,435 3,309 Income taxes payable 1,828 3,288 ------------------------- Total current liabilities 232,427 184,377 ------------------------- Deferred lease inducements 490 480 Deferred revenue - 303 Long-term debt (note 4) 11,645 12,671 ------------------------- Total non-current liabilities 12,135 13,454 ------------------------- Total liabilities 244,562 197,831 ------------------------- Shareholders' equity Capital stock (note 5) 26,001 25,842 Contributed surplus (note 6) 978 983 Retained earnings 68,795 64,263 Accumulated other comprehensive income 4,448 5,270 ------------------------- Total shareholders' equity 100,222 96,358 ------------------------- Total liabilities and shareholders' equity $ 344,784 $ 294,189 ------------------------- ------------------------- See accompanying notes to interim consolidated financial statements. Softchoice Corporation Interim Consolidated Statements of Earnings and Retained Earnings ---------------------------------------------------------------------------- (in thousands of U.S. dollars except per share information) (Unaudited) 3 month period ended 3 month period March 31, ended March 2010 31, 2009 Revenue Software $ 173,734 $ 128,993 Hardware 99,987 79,576 Agency fees 9,024 9,789 ----------------------------- 282,745 218,358 Cost of sales 246,299 187,704 ----------------------------- Gross profit 36,446 30,654 ----------------------------- Expenses Salaries and benefits 21,562 20,053 Selling, general and administrative 7,546 8,338 Amortization of property and equipment 777 719 Amortization of intangible assets (note 3) 1,834 1,943 ----------------------------- 31,719 31,053 ----------------------------- Operating income (loss) 4,727 (399) Foreign exchange (gain) loss (2,032) 1,616 Interest expense 674 834 Other (gain) loss (134) 311 ----------------------------- Earnings (loss) before income taxes 6,219 (3,160) ----------------------------- Income taxes (recovery) Current 1,923 (937) Future (236) 166 ----------------------------- 1,687 (771) ----------------------------- Net earnings (loss) for the period 4,532 (2,389) Retained earnings - Beginning of period 64,263 42,000 ----------------------------- Retained earnings - End of period $ 68,795 $ 39,611 ----------------------------- ----------------------------- Net earnings (loss) per common share (note 7) Basic $ 0.23 $ (0.14) Diluted $ 0.23 $ (0.14) Basic weighted average number of common shares outstanding 19,773,779 17,496,807 Diluted weighted average number of common shares outstanding 19,783,517 17,526,633 See accompanying notes to interim consolidated financial statements. Softchoice Corporation Interim Consolidated Statements of Cash Flows ---------------------------------------------------------------------------- (in thousands of U.S. dollars) (Unaudited) 3 month period 3 month ended period March 31, ended March 2010 31, 2009 Cash provided by (used in) Operating activities Net earnings (loss) for the period $ 4,532 $ (2,389) Items not affecting cash Amortization of property and equipment 777 719 Stock-based (recovery) compensation (note 6) 57 (277) Future income taxes (236) 166 Amortization of intangible assets (note 3) 1,834 1,943 Unrealized foreign currency (gain) loss (1,510) 1,905 Amortization of capitalized loan fees 330 182 Loss (gain) on disposal of property and equipment 43 (2) Net change in non-cash working capital items relating to operations (note 11) 9,155 (2,703) ----------------------- 14,982 (456) ----------------------- Financing activities Repayment of bank indebtedness (note 4) - (40,317) Increase in bank indebtedness (note 4) - 26,919 Repayment of long-term debt (note 4) - (13,688) Increase in long-term debt (note 4) - 14,125 (Decrease) in term loan (1,507) - Proceeds from issuance of common shares (note 5) 97 - ----------------------- (1,410) (12,961) ----------------------- Investing activities Purchase of property and equipment (259) (508) Purchase of intangible assets (148) - Proceeds on disposal of property and equipment - 4 ----------------------- (407) (504) ----------------------- Effect of exchange rate changes on cash 479 (35) ----------------------- Increase / (Decrease) in cash during the period 13,644 (13,956) Cash - Beginning of period 18,601 14,098 ----------------------- Cash - End of period $ 32,245 $ 142 ----------------------- ----------------------- Interest paid $ 700 $ 834 Income taxes paid $ 3,396 $ 2,699 Softchoice Corporation Interim Consolidated Statements of Comprehensive Income (in thousands of U.S. dollars) (Unaudited) 3 month 3 month period period ended ended March 31, March 31, 2010 2009 Net earnings (loss) for the period $ 4,532 $ (2,389) Other comprehensive income: Foreign currency translation adjustment (822) 1,483 --------------------- Total comprehensive income (loss) $ 3,710 $ (906) --------------------- --------------------- Accumulated other comprehensive income Balance - Beginning of period $ 5,270 $ 13,116 Foreign currency translation adjustment (822) 1,483 --------------------- Balance - End of period $ 4,448 $ 14,599 --------------------- --------------------- FOR FURTHER INFORMATION PLEASE CONTACT: Media Contact Softchoice Corporation Eric Gardiner Manager of Communications 416.588.9002 Ext. 2358 eric.gardiner@softchoice.com