TORONTO, Jan. 10, 2019 /CNW/ - Pivot Technology Solutions, Inc. (TSX: PTG) ("Pivot" or the "Company") today provided its estimated fourth quarter 2018 revenue and gross profit margin.
Fourth quarter results of operations have not been finalized, however revenue is expected to be approximately US$310-315 million (compared to US$399 million in 2017, and US$321 million in the third quarter of 2018). The decrease from the prior year was primarily due to lower sales to major customers. The reduction from Q3 2018 was also due to lower sales to major customers, partially offset by seasonal increases in volumes with non-major customers. The Company had anticipated higher volumes from major customers based on positive buying signals, however these buying intentions did not translate into revenue in the quarter as expected.
Fourth quarter gross profit margin is expected to be higher than the prior periods at over 13%, compared to 12.2% in Q4 2017 and 12.7% in Q3 2018, reflecting improved sales mix (primarily due to the proportion of sales to non-major customers), and the benefits of additional cost reductions implemented in the quarter. Gross margin for all of 2018 is estimated to be approximately 11.5-12% compared to 11.2% in 2017 on annual revenues of approximately US$1.4 billion compared to US$1.5 billion in 2017.
The Company expects to report positive Adjusted EBITDA1 for the fourth quarter and for all of 2018 despite lower revenue. (1Non-IFRS Measure. See Non-IFRS Measures section of this news release)
"During the quarter, we removed $5 million of annualized costs from the business, which supported higher margins despite lower product sales," said Kevin Shank, President and Chief Executive Officer. "Our cost reduction work will continue through the first half of 2019 and we expect it to result in a more flexible and efficient cost structure."
The Company is employing a five-part strategy: (i) continue to build on Pivot's core business of selling IT solutions, both products and services; (ii) enhance Pivot's service portfolio and capabilities, specifically related to services that Pivot delivers; (iii) continue the Company's commercial transformation to expand Pivot's addressable opportunities with existing customers; (iv) improve cost management; and (v) commercialize and monetize the Smart Edge™ technology.
The Company continued to make progress with Smart Edge™ during the quarter. In addition to the previously announced agreement that will see one of Pivot's customers re-sell the Smart Edge™ solution across its network, Pivot signed a funded agreement to collaborate with a strategic partner for the purpose of integrating each company's respective edge technologies to accelerate commercial deployments and use of the Smart Edge™ solution in multiple industries. This collaboration is also intended to provide a production ramp for trial deployments.
Smart Edge™ is an innovative developer platform designed to support enterprise Multi-Access Edge Computing (MEC) solutions. Through use cases to date, the Smart Edge™ solution has demonstrated its ability to improve performance, enhance user experiences and reduce ongoing edge total cost of ownership – all key factors in customer adoption of 5G technologies. Revenue generation is expected to grow with the adoption of 5G.
Pivot expects to report its final fourth quarter and audited 2018 financial results before March 31, 2019 and will host a conference call after results are released to provide additional commentary.
ABOUT PIVOT TECHNOLOGY SOLUTIONS
Pivot is an industry leading information technology services and solutions provider to many of the world's most successful companies, including members of the Fortune 1000, as well as governments and educational institutions. By leveraging its extensive OEM partnerships and its own fulfillment, professional, deployment, workforce and managed services, Pivot supports the IT infrastructure needs of its clients. For more information, visit www.pivotts.com.
The term "Adjusted EBITDA" does not have any standardized meaning prescribed within IFRS and therefore may not be comparable to similar measures presented by other companies. Such measures should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS such as net income. Adjusted EBITDA is defined as gross profit less employee compensation and benefits and other selling, general and administrative expenses, and corresponds to income before income tax, depreciation and amortization, finance expense, change in fair value of liabilities, and other (income) expense. Management believes Adjusted EBITDA is an important indicator (as it excludes certain items that are non-cash expenses, items that cannot be influenced by management in the short term, and items that do not impact core operating performance), demonstrating the Company's ability to generate liquidity through operating cash flow to fund working capital needs, service outstanding debt and fund future capital expenditures. Adjusted EBITDA is used by some investors and analysts for the purposes of valuing an issuer. The intent of Adjusted EBITDA is to provide additional useful information to investors and analysts and is also used by management as an internal performance measurement.
FORWARD LOOKING STATEMENTS
This news release contains statements that, to the extent they are not recitations of historical fact, may constitute "forward-looking statements" within the meaning of applicable Canadian securities laws. Pivot uses words such as "may", "would", "could", "will", "likely", "expect", "believe", "intend", "anticipate" and similar expressions to identify forward-looking statements. Any such forward-looking statements including statements about estimated financial results, cost reductions and the timing of Smart Edge™ orders are based on assumptions and analyses made by Pivot in light of its experience and its perception of historical trends, current conditions and expected future developments including the assumption that actual results for Q4 2018 and for fiscal year 2018 will not differ from estimated results once the fiscal 2018 audit is complete. However, whether actual results and developments will conform to Pivot's expectations and predictions is subject to any number of risks, assumptions and uncertainties, including the risk that actual revenue and expenses for Q4 2018 and fiscal year 2018 will differ from estimated revenue and expenses; and the risks detailed in the Company's Annual Information Form for the year ended December 31, 2017 available at sedar.com. Many factors could cause Pivot's actual results to differ materially from those expressed or implied by the forward-looking statements contained in this news release. The "forward-looking statements" contained herein speak only as of the date of this news release and, unless required by applicable law, the Company undertakes no obligation to publicly update or revise such information, whether as a result of new information, future events or otherwise.
SOURCE Pivot Technology Solutions, Inc