January 21, 2019 – TORONTO, ONTARIO, CANADA - Converge Technology Solutions Corp. (“Converge” or “the Company”) (TSXV:CTS) announced today announced today that it has acquired all of the Class A membership interests in Software Information Systems, LLC ("SIS"), a South-Central US based partner focused on managed cloud delivery, compute efficiency, network optimization, storage optimization, and IT spend optimization, from VBS Holding Company, Inc. ("VBS"), whose owners include the current management team of SIS. SIS brings highly skilled teams of experienced technology experts, business consultants, and industry thought leaders to Converge's fast growing platform. SIS generated revenues of approximately US$89 million including approximately US$13.7 million of managed services revenue, gross profit of approximately US$24.3 million and Adjusted EBITDA of approximately US$2.6 million for the trailing 12 months ended November 30, 2018. Consideration for the purchase consisted of (i) US$11.5 million in cash; plus (ii) the issuance of a right to VBS to exchange the Class B membership units in SIS still held by VBS (which have no right to any economic or voting participation in SIS) for an aggregate of 8,000,000 common shares of Converge (the "Exchange Right"), subject to certain conditions.
No exchange under the Exchange Right will be permitted until at least six months from the acquisition of SIS, at which point 1,500,000 Converge common shares will become eligible for issuance pursuant to the Exchange Right. An additional 1,500,000 common shares will become eligible for exchange on each six month anniversary of the completion of the transaction thereafter, such that all 8,000,000 common shares will only be available for exchange following the three-year anniversary of the acquisition. Once all of the Class B membership units in SIS have been exchanged pursuant to the Exchange Right, Converge will hold all of the membership interests in SIS. The Exchange Right will allow VBS to receive the equity component of the consideration for the acquisition of SIS on a tax-deferred basis, while giving Converge full control of, and economic interest in, SIS immediately.
SIS President & CEO Steve Sigg will continue in his role along with the rest of the existing SIS management team. Working with Steve, Converge will introduce its hybrid IT solutions including identity-based enterprise Blockchain, cognitive, cybersecurity, resiliency managed services and multi-cloud solutions to existing and new SIS customers while leveraging the SIS advanced managed cloud service offerings across North America.
SIS is a 36-year-old technology solutions and services company, collaborating with customers on innovative data center strategy, technology solutions in the cloud or on-premise to help customers drive impactful business results.
“The team at SIS has been committed to assisting our clients understand the challenges and benefits of public, private and hybrid cloud consumption. Our private cloud delivery solutions allow customers to self-provision and manage cross platform capabilities for IaaS, backup, resiliency, and security of their hosted workloads,” said Steve Sigg. “We look forward to working with the Converge companies to bring SIS competencies to their clients and introduce the expansive Converge product and service portfolio to our existing clients.”
“We are thrilled that SIS is joining the Converge family of companies,” said Shaun Maine, CEO of Converge. “SIS adds full scale managed services and cross platform cloud solutions, which when combined with the capabilities of Microsoft Azure from Corus; Amazon Web Services form BlueChip Tek; cloud, cognitive and cybersecurity from Essex; and software and Red Hat from Lighthouse add significant capabilities to the Hybrid IT solutions Converge can offer to its customers. This acquisition solidifies Converge as a major Hybrid IT provider in North America.”
SIS marks the eighth transaction completed by Converge since October 2017. Converge’s family of companies also includes Corus Group, LLC; Northern Micro, Inc.; 10084182 Canada Inc. operating as Becker-Carroll; Key Information Systems, Inc.; BlueChip Tek, Inc.; Lighthouse Computer Systems, Inc.; and Essex Technology Group, Inc.
About Converge
Converge Technology Solutions Corp. combines innovation accelerators and foundational infrastructure solutions to deliver best-of-breed solutions and services to customers. The Company is building a platform of regionally-focused Hybrid IT solutions providers to enhance their ability to provide multi-cloud solutions, blockchain, resiliency, and managed services, enabling Converge to address the business and IT issues that public and private-sector organizations face today. For more information, visit http://www.convergetp.com.
SIS is a nationally-recognized, leading technology and managed IT solutions provider helping clients design, optimize and support mission-critical assets. Regionally-focused teams across the country solve challenges and design solutions, leaving more time for clients to devote resources to core business strategies. SIS’ proven methodology, experienced professionals and innovative technologies provide the highest quality of IT service to more than 1,300 clients, both large and small. For more information, visit http://www.thinkSIS.com.
For further information contact:
Mary Anne Palangio
Chief Financial Officer
Converge Technology Solutions Corp.
investors@convergetp.com
(416) 360-1495
Notice to Reader: Use of Non-IFRS Financial Measures and Forward-Looking Statements
1.Non-IFRS Financial Measures
In this news release, certain non-IFRS measures to evaluate performance are used. 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 selling, general and administrative expenses, and corresponds to income before income tax, depreciation and amortization, finance expenses, change in fair value of contingent consideration, transaction costs for acquisitions and other non-operating expenses.
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 SIS’ 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.
2.Forward-Looking Information
This news release contains certain “forward-looking information” and “forward-looking statements” (collectively, “forward-looking statements”) within the meaning of applicable Canadian securities legislation regarding Converge and its business. Any statement that involves discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions, future events or performance (often but not always using phrases such as “expects”, or “does not expect”, “is expected” “anticipates” or “does not anticipate”, “plans”, “budget”, “scheduled”, “forecasts”. “estimates”, “believes” or intends” or variations of such words and phrases or stating that certain actions, events or results “may” or “could, “would”, “might” or “will” be taken to occur or be achieved) are not statements of historical fact and may be forward-looking statements. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable, are subject to known and unknown risks, uncertainties, and other factors which may cause the actual results and future events to differ materially from those expressed or implied by such forward-looking statements. Except as required by law, Converge assumes no obligation to update the forward-looking statements of beliefs, opinions, projections, or other factors, should they change. The reader is cautioned not to place undue reliance on forward-looking statements.
Neither the TSX Venture Exchange nor its regulation services provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
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