Pivot Technology Solutions Reports Second Quarter 2015 Results
CARLSBAD, CA, Aug. 21, 2015 - Pivot Technology Solutions, Inc. ("Pivot" or the "Company") (TSX-V: PTG), today publishes its results for the second quarter ended June 30, 2015.
Financial Highlights Q2 2015
~ Revenues of $357.9 million, up 18.2% compared to Q2 2014, attributable both to strong product sales and continued growth of the Company`s services business.
~ Product sales of $314.2 million, up 19.2% compared to Q2 2014.
~ Service revenues up 11.4% to $40.8 million compared to Q2 2014.
~ Gross profit up $7.1 million, or 18.6%, to $45.3 million from the same period in the prior year.
~ Gross margin for the quarter was 12.7%, up slightly from 12.6% in Q2 2014.
~ Adjusted EBITDA* came in at $9.9 million, up 29.1% from Q2 2014.
~ Adjusted for changes in non-cash working capital balances, the Company generated $5.9 million in cash from operating activities, as compared to $5.4 million for the same period last year.
Quarterly Dividend
The Company also announced today that its board of directors declared, under its approved dividend policy, a cash dividend on the common shares of the Company (the "Shares") in the amount of CAD $0.0075 per Share for the quarter (an annualized amount of CAD $0.03 per Share), which will be payable on September 15, 2015, to holders of record at the close of business on August 31, 2015.
Financial Highlights H1 2015
Revenues of $654.3 million, up 5.2% compared to H1 2014.
Gross profit up 5.2% to $77.5 million from the same period in the prior year, representing a gross margin of 11.8%, equal to H1 2014.
Adjusted EBITDA* down 19.2% to $11.2 million, as compared to H1 2014.
Adjusted for changes in non-cash working capital balances, the Company generated $7.1 million in cash from operating activities, compared to $9.6 million for the same period last year.
Management Commentary
Warren Barnes, CEO of Pivot, commented, "We are pleased with our results, which reflect a strong recovery from Q1 of this year. Our competitive positioning remains strong, which allowed us to benefit from the upswing in general economic activity we witnessed towards the end of the quarter. This resulted in an encouraging improvement in all our key financial metrics compared to Q2 of 2014. Growth was driven primarily by a number of larger deals at existing customers, in part a reflection of catch up on previously delayed investment. We also experienced positive momentum in onboarding new accounts, and continued strength in our services business. As a consequence of our continued solid progress, we are pleased to declare our first ever quarterly common dividend."
Kerri Brass, CFO of Pivot, stated, "Our overall revenue growth of 18.2% for the quarter, as compared to the same quarter last year, was primarily driven by strong growth from our non-major customers. This growth, complemented by gross margins that were marginally improved over Q2 2014, drove a 29.1% increase in adjusted EBITDA* as activity returned to levels more aligned to our existing support infrastructure. Service revenues as a percentage of total revenues were 12.1% for the half year compared to 11.3% at this point in 2014, as service revenues grew 13.2% year over year."
Mr. Barnes concluded, "Although we are still behind on year-to-date adjusted EBITDA* compared to 2014 due to a softer than usual Q1 of this year, we made good progress during the second quarter, and general business activity into Q3 appears to have returned to more normal levels. We are seeing positive momentum in our sales funnel, although at this point it is too early to project how this will translate into revenues for Q3 and beyond. We remain focused on maintaining and developing our strong competitive positioning through innovation and the strength of our customer and vendor relationships, and will continue to pursue cross-selling opportunities for both products and services across the business."
Q2 2015 Financial Review
Revenues came in at $357.9 million, up 18.2% from Q2 2014 and up 20.8% from Q1 2015. Revenue growth was attributable both to increased product sales and to continued growth of the Company`s services business.
Product sales for the quarter increased by 19.2%, or $50.5 million, to $314.2 million, as compared to Q2 2014. Sequentially, product sales increased by 22.9%, compared to Q1 2015. Product sales to major customers increased by $11.1 million for the quarter, while product sales to non-major customers increased by $39.4 million, as compared to the same period in the prior year.
Service revenues for Q2 increased by 11.4%, or $4.2 million, to $40.8 million, as compared to Q2 2014. The Company's high value add service offerings are consolidated under single leadership, reflecting our ability to now provide this offering in all geographies we operate in, increasing our market reach and adding momentum to growth.
Overall, revenues from non-major customers increased by 23.9%, or $46.4 million, while revenues from major customers increased by $8.8 million, or 8.1%.
Gross profit of $45.3 million was up 18.6%, or $7.1 million, from Q2 2014, and up 40.7%, or $13.1 million, from Q1 2015. Gross profit margin of 12.7% was up marginally from 12.6% in Q2 2014, and up from 10.9% in Q1 2015. The increase in gross profit was attributable to higher revenues and continued growth of the Company's higher margin service offerings, as well as a selective focus on higher margin product sales.
The Company recorded adjusted EBITDA* for Q2 2015 of $9.9 million, up 29.1% from Q2 2014, and up 657.8% from Q1 2015. The growth in adjusted EBITDA* compared to the same period last year was attributable to higher revenues and margins, partially offset by higher sales and administrative expenses. Compared to Q1 2015, the strong increase in adjusted EBITDA* was attributable predominantly to higher revenues and margins, as well as leverage of the Company's support infrastructure.
Selling and administrative expenses for Q2 2015 increased by 15.9%, or $4.9 million, to $35.4 million, as compared to Q2 2014. The bulk of this increase, or $4.0 million, was due to increases in salaries and employee benefits. Underlying this increase was an increase in headcount as investments were made to drive future growth, salary increases and increased benefit costs, as well as higher commissions as a result of the increased revenue and gross profit period over period.
All outstanding Series A Preferred Shares (58,094,630) were converted into common shares of the Company, effective March 16, 2015. Consequently, no preferred share dividends were declared during the quarter, as compared to $0.7 million for the same quarter in the prior year.
Adjusted for changes in non-cash working capital balances, the Company generated $5.9 million in cash from operating activities, as compared to $5.4 million for the same period last year, and $1.2 million for Q1 2015. As at June 30, 2015, total cash on hand was $11.6 million, up from $8.5 million for December 31, 2014, and up from $8.8 million for March 31, 2015. The changes in cash on hand were related to movements in working capital.
Normal fluctuations in revenue performance, which are commonplace in the industry, drive significant movements in working capital, in particular with regards to accounts receivable, inventory and accounts payable. As such, movements in working capital balances are largely volume related, however, the Company focuses on driving improvement in its business processes to optimize the use of its secured borrowing facilities and effectively manage working capital.
H1 2015 Financial Review
Revenues for the six months ended June 30, 2015 increased by $32.2 million, or 5.2%, to $654.3 million, as compared to the same period last year, driven both by increased product sales and increased revenues from services.
Product sales increased by 4.1%, or $22.5 million, to $596.8 million, driven by non-major customer growth of $32.5 million, offset by a decrease in revenues from major customers of $10.1 million.
Service revenue increased by 13.2%, or $9.3 million, on a year over year basis to $79.4 million, as compared to H1 2014. Service revenues accounted for 12.1% of total revenue, up from 11.3% in 2014.
Revenue growth and a growing contribution from the Company's higher-margin services business resulted in gross profit for the period of $77.5 million, up by 5.2% compared to the same period in the previous year. Gross margin remained constant at 11.8%.
Adjusted EBITDA* for H1 2015 fell by $2.7 million, or 19.1% to $11.2 million, as compared to H1 2014, attributable to lower business volume in Q1 2015 due to a general market softness in that quarter.
Adjusted for changes in non-cash working capital balances, the Company generated $7.1 million in cash from operating activities, as compared to $9.6 million for the same period last year, attributable largely to the lower business activity experienced in the first quarter of 2015.
Conference Call
Management will host a conference call on August 21, 2015 at 11:00 am ET.
DATE: Friday, August 21, 2015
TIME: 11:00 a.m. ET
DIAL IN NUMBER:
+1 647-427-7450
+1 888-231-8191
TAPED REPLAY:
+1 416-849-0833
+1 855-859-2056
Available from August 21, 2015 14:00 ET to September 4, 2015 23:59 ET
Reference number: 9973579
Subsequently, a recording of the call will be posted on the Company's website: www.pivotts.com.
About Pivot Technology Solutions, Inc.
Together with its portfolio companies and partners, Pivot delivers solutions that enable organizations to design, build, implement and maintain computing and communication infrastructure that addresses their unique business needs. Pivot's approach supports improvement of business performance, helps organizations reduce capital and operating expenses, and accelerates the delivery of new products and services to end-customers. With over 2,000 customers, many of whom are Fortune 1000 companies, Pivot extends its value added solutions to help organizations of all sizes improve operating efficiency, reduce complexity and enhance service delivery through virtualization and cloud computing. Pivot enables businesses to extend their enterprise through mobility solutions to better connect business partners and customers. Pivot has offices throughout North America and can be found online at www.pivotts.com
