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Converge Technology Solutions Reports Fiscal Performance

Converge Technology Solutions Corp. has unveiled its financial performance for the fourth quarter and the full fiscal year ending December 31, 2024. Below, we explore the highlights and implications of these results as the company moves forward in a challenging economic landscape.

Fourth Quarter Highlights

In Q4 of 2024, Converge reported gross sales reaching $1.11 billion, marking a year-on-year increase of $27.4 million, or 2.5%. This growth was complemented by organic sales growth of 3% despite the company facing a decrease in gross profit margin, which dropped to 26.7%.

• - Revenue and Profit Margins: The revenue figures showed a healthy increase, totaling $680.8 million, a rise of $29.7 million compared to the same period last year. However, gross profit saw a slight dip of 1.6%, totaling $178.6 million. Adjusted EBITDA rose by 3% to $47.9 million, showcasing the company's ability to maintain operational efficiency even in less favorable conditions.
• - Cash Flow Management: Converge's operational activities generated $57 million in cash, although this represents a decline from $114.5 million year-on-year. The firm returned $20.6 million to shareholders, a significant rise from $4.7 million in Q4 of the previous fiscal year, indicating a commitment to shareholder value.
• - Debt Management: Notably, Converge also reduced its net debt to $113.4 million, achieving a leverage ratio below 0.7x, which is seen as a positive sign for potential investors.

Fiscal Year 2024 Overview

Throughout the fiscal year, Converge reported gross sales of $4.12 billion, reflecting a modest increase of $82.8 million from the prior year. However, revenues decreased by 4.2% to $2.59 billion while gross profit fell 1.6% to $691.4 million.

• - Net Loss and Adjusted Income: The company faced a significant net loss of $181 million, greatly influenced by a non-cash impairment charge related to its operations in Germany. This presents a challenging narrative against an otherwise active year where the company returned approximately $82.3 million to its shareholders.
• - Growth Initiatives: Despite setbacks, Converge continues to invest in strategic initiatives aimed at innovation and cloud solutions. Their focus on human-centric IT services and digital transformation highlights their commitment to adapting in an evolving market.

Future Prospects

Looking ahead, on February 7, 2025, Converge announced plans for acquisition by H.I.G. Capital at a cash value of $5.50 per share, reflecting a notable premium. This deal, pending shareholder approval, indicates strategic consolidation in the technology sector.

• - Special Meeting Scheduled: Shareholders will convene on April 10, 2025, to vote on the proposed acquisition. Should the transaction go through, Converge will remove itself from public market engagements, marking a significant transition in its operational strategy.
• - No Earnings Calls: Due to the impending acquisition, the company has ceased hosting earnings calls and will not provide revenue outlooks for FY 2025, signaling a shift in focus towards the completion of the sale process.

Conclusion

Converge Technology Solutions continues to navigate its growth journey amidst various challenges, maintaining strategic relations and leveraging market opportunities. The announced acquisition by H.I.G. Capital may offer fresh avenues for investment and operational restructuring. Stakeholders remain keenly aware of how these changes will shape the future of Converge in the technology landscape. As the company realigns its financial strategies and explores new partnerships, industry watchers will be closely observing the impact of these developments on the overall IT ecosystem.