Published: August 09, 2011
Softchoice Announces Strong Earnings Growth for the Second Quarter of 2011
- Adjusted EPS grows by 28.6 percent
- Gross profit grows 18.3 percent
- Gross margins improve 184 basis points
- EBITDA as a percentage of revenue improves to 7.8 percent
Softchoice Corporation (TSX:SO), a leading North American provider of technology solutions and services, today reported its financial results for the second quarter of 2011.
For the three-month period ended June 30, 2011, Softchoice reported net income of US$10.9 million compared to net income of US$6.2 million for the same period the year prior. Adjusting for the impact of foreign exchange gains and losses, net earnings in the quarter amounted to US$10.6 million, or US$0.54 per share (basic and fully diluted), compared to net earnings of US$8.3 million, or US$0.42 per share (basic and fully diluted) for the second quarter of 2010. Adjusted net earnings per share grew 28.6 percent year-over-year.
The Company reported revenue of US$252.9 million compared to US$233.3 million for the second quarter of 2010, representing an increase of 8.4 percent. Microsoft sales were up 9.8 percent in the quarter, while sales of hardware infrastructure solutions grew by 18 percent.
"Consistent with our long-term strategy to increase the value of our solutions portfolio, the addition of pre-sales and professional services resources coupled with solid demand across the major segments of our business have translated into strong earnings growth and steady improvements in our margin performance," said David MacDonald, President and CEO of Softchoice. "As we look to the balance of year, we are well positioned to benefit from the ongoing technology refresh cycle and from new incentives Microsoft has created for partners who provide value-added support around the deployment of leading Microsoft solutions."
Gross profit was US$55.5 million in the quarter, representing an increase of 18.3 percent compared to gross profit of US$46.9 million reported for the second quarter of 2010. Earnings before interest, taxes, depreciation and amortization (EBITDA) increased 23.6 percent to US$19.8 million delivering a 96 basis point year-over-year increase in EBITDA margin to 7.8 percent.
"The strong growth in EBITDA in the quarter reflects the success of our strategy to shift a greater proportion of our gross profit mix to higher margin engagements such as server and storage virtualization and private cloud solutions," added Mr. MacDonald. "While still in the early stages, we are very pleased with these results and with the impact our pre-sales and services investments have had on driving substantial improvements in the productivity of our sales organization."
At the close of the second quarter, the Company had US$42.5 million in cash on hand.
Softchoice's interim consolidated financial statements and MD&A are available at http://www.softchoice.com/about/ir/.
Additional Quarterly Highlights
-- Softchoice appoints Paul Khawaja, the former President of Xwave, as the
Senior Vice President of the Company's Professional Services
organization.
-- For the second consecutive year, Softchoice received the award for
Operational Excellence at the 2011 Microsoft Worldwide Partner
Conference.
Second Quarter Earnings Call Participant Details
Softchoice will host its second quarter earnings call on August 10, 2011 at 8 a.m. EDT.
The call will be moderated by David MacDonald, Softchoice's President and CEO, and Chief Financial Officer, David Long. The conference call will begin with a brief web presentation followed by a question-and-answer session.
Softchoice will release its second quarter earnings results the evening of August 9, 2011.
Second Quarter Earnings Details
Participant Dial in Number: 1 866 212 4491
Webcast URL:
http://www.snwebcastcenter.com/custom_events/softchoice-20110810/site/
To ensure participation, please dial in at least 10 minutes prior to the start of the conference call at 8:00 a.m. EDT.
For those unable to attend the call, a link will be made available on www.softchoice.com/about/ir to an archived web and audio version on August 11, 2011.
About Softchoice
As a leading North American provider of technology solutions and services, Softchoice combines the efficiency and reliability of a national IT supplier with the personal touch and technical expertise of a local solutions provider. Softchoice's holistic approach to technology includes solution design, implementation and asset management services, as well as access to one of the most comprehensive and cost-effective technology distribution networks in North America. With over 950 employees located in more than 40 branch offices, Softchoice manages the technology needs of almost 15,000 corporate and public sector organizations across the United States 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 Statements
This 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.
TORONTO, ONTARIO--(Marketwire - Aug. 9, 2011) -
Interim Consolidated Financial Statements
(Expressed in U.S. dollars)
SOFTCHOICE CORPORATION
Three-month and six-month periods ended
June 30, 2011 and 2010
(Unaudited)
SOFTCHOICE CORPORATION
Interim Consolidated Statements of Financial Position
(In thousands of U.S. dollars)
(Unaudited)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
June 30, December 31,
2011 2010
----------------------------------------------------------------------------
Assets
Cash $ 42,510 $ 35,752
Trade and other receivables (note 10) 226,632 224,168
Inventory 1,417 881
Deferred costs 7,888 7,082
Prepaid expenses and other assets 3,388 2,881
----------------------------------------------------------------------------
Total current assets 281,835 270,764
Restricted cash (note 9) 500 500
Long-term accounts receivable 1,118 2,771
Property and equipment 6,332 5,748
Goodwill 11,586 11,383
Intangible assets 39,052 41,155
Deferred tax assets (note 17) 19,458 19,023
----------------------------------------------------------------------------
Total non-current assets 78,046 80,580
----------------------------------------------------------------------------
Total assets $ 359,881 $ 351,344
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Trade and other payables $ 207,824 $ 217,888
Provisions 712 98
Loans and borrowings (note 11) 3,957 3,961
Deferred lease inducements 286 193
Deferred revenue 2,989 1,899
Income taxes payable 3,860 2,320
----------------------------------------------------------------------------
Total current liabilities 219,628 226,359
Deferred lease inducements 717 217
Loans and borrowings (note 11) 6,284 8,271
----------------------------------------------------------------------------
Total non-current liabilities 7,001 8,488
----------------------------------------------------------------------------
Total liabilities 226,629 234,847
Capital stock (note 12) 26,503 26,016
Contributed surplus 2,625 2,054
Retained earnings 105,677 89,569
Accumulated other comprehensive loss (1,553) (1,142)
----------------------------------------------------------------------------
Total shareholders' equity 133,252 116,497
----------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 359,881 $ 351,344
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Related party transactions (note 14)
The accompanying notes are an integral part of these unaudited interim
consolidated financial statements.
SOFTCHOICE CORPORATION
Interim Consolidated Statements of Comprehensive Income
(In thousands of U.S. dollars, except per share information)
(Unaudited)
Three months ended Six months ended
June 30, June 30,
2011 2010 2011 2010
----------------------------------------------------------------------------
Net sales $ 252,946 $ 233,326 $ 502,664 $ 434,886
Cost of sales 197,434 186,393 403,238 351,505
----------------------------------------------------------------------------
Gross profit 55,512 46,933 99,426 83,381
Expenses:
Selling and marketing (note 4) 26,367 22,427 52,999 45,376
Administrative (note 4) 11,579 10,738 21,912 19,619
Other income (note 5) - (7) (78) (707)
Other expenses (note 6) - - - 42
---------------------------------------------------------------------------
37,946 33,158 74,833 64,330
----------------------------------------------------------------------------
Results from operating
activities 17,566 13,775 24,593 19,051
Finance costs (note 7) 1,033 3,574 2,080 2,800
Finance income (note 8) (373) (126) (1,639) (132)
----------------------------------------------------------------------------
Net finance cost 660 3,448 441 2,668
----------------------------------------------------------------------------
Earnings before income taxes 16,906 10,327 24,152 16,383
Income tax expense (note 17) 5,958 4,128 8,044 5,796
----------------------------------------------------------------------------
Net earnings for the period 10,948 6,199 16,108 10,587
Other comprehensive income:
Foreign currency translation
adjustments (57) 916 (411) 95
----------------------------------------------------------------------------
Total comprehensive income $ 10,891 $ 7,115 $ 15,697 $ 10,682
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net earnings per common share:
Basic (note 13) $ 0.55 $ 0.31 $ 0.81 $ 0.54
Diluted (note 13) 0.55 0.31 0.81 0.53
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----------------------------------------------------------------------------
The accompanying notes are an integral part of these unaudited interim
consolidated financial statements.
SOFTCHOICE CORPORATION
Interim Consolidated Statements of Changes in Equity
(In thousands of U.S. dollars)
(Unaudited)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cumulative Total
Six-month Cont- trans- share-
period ended Number Share ributed lation Retained holders'
June 30, 2011 of shares capital surplus account earnings equity
----------------------------------------------------------------------------
Balance, January
1, 2011 19,780,039$ 26,016$ 2,054$ (1,142)$ 89,569$ 116,497
Total
comprehensive
income
for the period:
Profit or loss - - - - 16,108 16,108
Other
comprehensive
income:
Foreign
currency
translation
adjustment - - - (411) - (411)
----------------------------------------------------------------------------
Total
comprehensiv
e
income
for the period - - - (411) 16,108 15,697
Trans-
actions with
shareholders
recorded
directly
in equity:
Contri-
butions by
and
distri-
butions to
owners:
Share
options
exercised 1,250 26 (6) - - 20
Share-based
payment
transacti
ons - - 1,038 - - 1,038
Transfer
from
contri-
buted
surplus
(note 12) 52,573 461 (461) - - -
----------------------------------------------------------------------------
53,823 487 571 - - 1,058
----------------------------------------------------------------------------
Balance,
June 30, 2011 19,833,862$ 26,503$ 2,625$ (1,553)$ 105,677$ 133,252
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cumulative Total
Six-month Cont- trans- share-
period ended Number Share ributed lation Retained holders'
June 30, 2010 of shares capital surplus account earnings equity
----------------------------------------------------------------------------
Balance, January
1, 2010 19,759,189$ 25,842$ 983$ -$ 69,504$ 96,329
Total
comprehensive
income
for the period:
Profit or loss - - - - 10,587 10,587
Other
comprehensive
income:
Foreign
currency
translation
adjustment - - - 95 - 95
----------------------------------------------------------------------------
Total
comprehensive
income
for the period - - - 95 10,587 10,682
Trans-
actions with
shareholders
recorded
directly
in equity:
Contri-
butions by
and
distri-
butions to
owners:
Share
options
exercised 19,600 97 - - - 97
Share-based
payment
trans-
actions - - 467 - - 467
Transfer
from
contr-
ibuted
surplus
(note 12) - 62 (62) - - -
----------------------------------------------------------------------------
19,600 159 405 - - 564
----------------------------------------------------------------------------
Balance,
June 30, 2010 19,778,789$ 26,001$ 1,388$ 95$ 80,091$ 107,575
----------------------------------------------------------------------------
----------------------------------------------------------------------------
The accompanying notes are an integral part of these unaudited interim consolidated financial statements.
SOFTCHOICE CORPORATION
Interim Consolidated Statements of Cash Flows
(In thousands of U.S. dollars)
(Unaudited)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three months ended Six months ended
June 30, June 30,
2011 2010 2011 2010
----------------------------------------------------------------------------
Cash provided by (used in):
Operating activities:
Earnings for the period $ 10,948 $ 6,199 $ 16,108 $ 10,587
Adjustments for:
Depreciation of property
and equipment 1,047 664 1,729 1,441
Share-based compensation 676 322 1,038 467
Income taxes expense 5,958 4,128 8,044 5,796
Amortization of intangible
assets 1,180 1,585 2,777 3,420
Unrealized foreign
currency gain (262) 1,682 (1,307) 172
Amortization of contract
related assets 370 329 727 660
Interest expense on
financial liabilities 486 662 1,008 1,362
Loss on disposal of
property
and equipment - - - 42
---------------------------------------------------------------------------
9,455 9,372 14,016 13,360
Change in non-cash
operating
working capital (note 16) (17,141) 2,253 (11,126) 12,995
------------------------------------------------------------------------
Interest paid (479) (617) (1,001) (1,317)
--------------------------------------------------------------------------
2,783 17,207 17,997 35,625
Income tax paid (3,988) (2,544) (6,972) (5,980)
-------------------------------------------------------------------------
(1,205) 14,663 11,025 29,645
Financing activities:
Repayment of loans and
borrowings (1,142) (369) (2,418) (1,876)
Proceeds from issuance of
common
shares 10 - 10 97
---------------------------------------------------------------------------
(1,132) (369) (2,408) (1,779)
Investing activities:
Purchase of property and
equipment (839) (254) (1,417) (513)
Purchase of intangible
assets (541) (277) (1,015) (425)
---------------------------------------------------------------------------
(1,380) (531) (2,432) (938)
----------------------------------------------------------------------------
Net increase (decrease) in
cash during the period (3,717) 13,763 6,185 26,928
Cash, beginning of period 46,096 32,245 35,752 18,601
Effect of exchange rate
changes on cash 131 (526) 573 (47)
----------------------------------------------------------------------------
Cash, end of period $ 42,510 $ 45,482 $ 42,510 $ 45,482
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