IT Solutions

Softchoice Announces Third Quarter 2021 Results

Gross Sales increased 21% driven by 34% increase in Software & Cloud

Gross profit increased 24% to $65 million with double digit growth across all IT solutions and sales channels

Softchoice Corporation (“Softchoice” or the “Company”) (TSX: SFTC) today announced its financial results for the quarter ended September 30, 2021 (“Q3 2021”). The Company also reiterated its 2022 Outlook provided during its IPO. Unless otherwise noted, all dollar ($) amounts are in U.S. dollars.

“Softchoice achieved strong third quarter organic growth including a 24% increase in our gross profit, our key top line measurement, driven by increasing customer consumption of cloud products,” said Vince De Palma, Softchoice’s President & CEO. “Our strategic focus in our hybrid multi-cloud, collaboration/digital workplace, and software asset management solutions, supported by significant investments we have made in our technical and sales enablement resources, cloud strategies and business transformation initiative Project Monarch, resulted in record salesforce productivity in Q3 and increased customer engagement, with net revenue retention over the last year rising to 108% and average gross profit per customer hitting record levels.”

“We recorded double digit growth in gross profit across all of our sales channels and greater than 20% growth in each of our Software & Cloud, Services and Hardware IT solutions, the latter despite the negative impact of ongoing hardware shortages globally on sales,” added Bryan Rocco, Softchoice’s Chief Financial Officer. “Our decline in Adjusted EBITDA was due to the impact of foreign exchange, as well as increased operating expenses from our ramp of sales-enablement investments to drive growth and certain non-recurring professional fees incurred to support the implementation of a new digital workflow platform for our managed services offering. Additionally, in Q3 2020, we received $3.7 million in government wage subsidies which offset reported expenses versus none in Q3 2021.”1

In Q4, the Company’s target remains to achieve double digit year-over-year growth in gross profit, with seasonality expected to remain consistent with historical periods with Q2 and Q4 being the Company’s largest quarters. Combined with anticipated strong cash flow generation, the Company expects to enter 2022 in a strong financial position.

The Company also reiterated its financial outlook for 2022 today, remaining on track to realize the anticipated net benefits of Project Monarch, driven primarily by top line gross profit enhancements. The Company’s immediate focus going forward is on continued execution, investments in sales enablement resources and additional account executives, and realizing the full benefits from Project Monarch to accelerate our growth and margins.

Financial Summary1

US$ M except per share amounts and
 Q3 2021 Q3 2020 Growth
 YTD 2021 YTD 2020 Growth
Gross Sales 426.4 351.0 21.5% 1,365.4 1,212.0 12.7%
Net sales 199.0 169.5 17.4% 644.9 605.4 6.5%
Gross profit 65.2 52.7 23.8% 201.2 172.8 16.4%
Adjusted EBITDA 11.3 13.1 (14.1%) 42.6 39.5 8.0%
Adjusted EBITDA as a % of Gross Profit 17.3% 24.9%  21.2% 22.8%  
Income (loss) from operations 4.6 1.4 228.0% (7.5) 0.4 (1857.1%)
Net income (loss) (2.2) (0.9) 157.7% (17.3) (17.2) 0.7%
Net income (loss) per Diluted Share
(attributable to the Owners of the
 $(0.04) $(0.03) 40.0% $(0.37) $(0.27) 36.1%
Adjusted Net Income 5.6 4.0 40.4% 20.0 15.6 27.7%
Adjusted EPS (Diluted) $0.09 $0.07 24.9% $0.36 $0.28 29.5%

* Adjusted EBITDA is not adjusted to subtract funds received under the Canada Emergency Wage Subsidy (“CEWS”) program provided by the federal government of Canada and therefore reflects the lower operating costs resulting from the CEWS payments, including $3.7 million in Q3 2020 and YTD 2020 (and $10.3 million in Q4 2020) compared to nil in Q3 2021 and $0.7 million in YTD 2021.

Financial Position

The Company is in strong financial condition, including a $275 million revolving credit facility, with approximately $106.1 million in loans and borrowings outstanding at September 30, 2021. Including internally generated cash flows, the Company anticipates having significant resources with which to pursue growth opportunities.

Net debt, equating to loans and borrowings plus lease liabilities less cash-on-hand, was $127.8 million at September 30, 2021 compared to $190.6 million at December 31, 2020, with the decline driven by proceeds from the IPO as well as net cash flows from operating activities in the nine months ended September 30, 2021. The ratio of net debt to Adjusted EBITDA over the last twelve months was 1.9x at September 30, 2021 compared to 2.9x at December 31, 2020.


Softchoice anticipates paying quarterly cash dividends of approximately C$0.07 per Common Share. The Company’s next cash dividend, which will be for the period from October 1, 2021 to December 31, 2021, is expected to be paid on or about January 14, 2022 to shareholders of record on December 31, 2021.

Our Outlook 1

Softchoice reiterated its 2022 financial outlook that was included in its Prospectus (as defined below). For full-year 2022, the Company is expecting:

  • Gross Profit of over $300 million, representing a 12% CAGR from 2020 to 2022
  • Adjusted EBITDA of $90 million to $100 million, inclusive of ~$25 million of Project Monarch Uplift
  • Adjusted Free Cash Flow Conversion of approximately 90%

Our outlook is based on certain assumptions and factors (including those relating to our view of the drivers of, and expectations related to, our anticipated growth), including the key assumptions and factors set out in the Prospectus under ‘Our Outlook’. For important information on risk factors, refer to “Forward Looking Information Disclaimer” later in this news release.

Quarterly Conference Call

Softchoice’s management team will hold a conference call to discuss our Q3 2021 results today, November 12, 2021, at 8:30 a.m. ET.

DATE: Friday, November 12, 2021
TIME: 8:30 a.m. Eastern Time
DIAL-IN: 416-764-8659 or 1-888-664-6392, Confirmation # 20486052
TAPED REPLAY: 416-764-8677 or 1-888-390-0541, Replay Code 486052 # (available until November 19, 2021)

A link to the webcast will also be available on the Events page of the Investors section of Softchoice’s website at Please connect at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be required to join the webcast. An archived replay of the webcast will be available for 90 days.

Capitalized Terms

Capitalized terms used in this release, including Project Monarch, and terms we use to describe our IT solution types including Software & Cloud, Services, and Hardware and sales channels including SMB, Commercial, and Enterprise are described in the Company’s Management’s Discussion and Analysis of Financial Condition and Results of Operations for the three and nine-months ended September 30, 2021 (the “Q3 2021 MD&A”), and/or defined in the Company’s final initial public offering prospectus dated May 26, 2021 (the “Prospectus”) filed on SEDAR and available on the Company’s investor relations website

1 Non-IFRS Measures

This news release makes reference to certain non-IFRS measures and other measures. These measures are not recognized measures under International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing further understanding of our results of operations from management’s perspective. Accordingly, these measures should not be considered in isolation nor as a substitute for analysis of our financial information reported under IFRS. We use non-IFRS measures, including “Adjusted EBITDA”, “Adjusted EBITDA as a Percentage of Gross Profit”, “Adjusted Cash Operating Expenses”, “Adjusted Net Income (Loss)”, “Adjusted EPS”, “Adjusted Free Cash Flow Conversion”, and “Gross Sales”. These non-IFRS measures and other measures are used to provide investors with supplemental measures of our operating performance and thus highlight trends in our core business that may not otherwise be apparent when relying solely on IFRS measures. Our management uses these non-IFRS measures and other measures in order to facilitate operating performance comparisons from period to period, to prepare annual operating budgets and forecasts and to determine components of management compensation. We also believe that securities analysts, investors and other interested parties frequently use certain of these non-IFRS measures and other measures in the evaluation of issuers. As required by Canadian securities laws, we reconcile the non-IFRS measures to the most comparable IFRS measures. For more information on non-IFRS measures and other measures, see the Q3 2021 MD&A filed on SEDAR and available on the Company’s investor relations website

Reconciliations of Non-IFRS Financial Measures

(Information in thousands of U.S. dollars, unless
otherwise stated)
Three Months EndedSeptember 30,Nine Months EndedSeptember 30,
Reconciliation of Net Sales to Gross Sales2021202020212020
Net sales199,009169,523644,891605,360
Net adjustment for sales transacted as agent227,417181,490720,475606,614
Gross Sales426,426351,0131,365,3661,211,974
Reconciliation of Operating Expenses to Adjusted Cash
Operating Expenses
Operating expenses60,56651,244208,630172,423
Depreciation and amortization(5,424)(6,501)(16,140)(17,203)
Equity-settled share-based compensation and other costs (1)(498)(1,057)(29,180)(9,310)
Non-recurring compensation and other costs (2)(163)(633)(682)(1,423)
Business transformation non-recurring costs (3)(334)(3,519)(1,074)(11,113)
IPO related costs (4)(235)(2,992)
Adjusted Cash Operating Expenses53,91239,534158,562133,374
Reconciliation of Income (loss) from operations to
Adjusted EBITDA
Income (loss) from operations4,6181,408(7,450)424
Depreciation and amortization5,4246,50116,14017,203
Equity-settled share-based compensation and other costs (1)4981,05729,1809,310
Non-recurring compensation and other costs (2)1636336821,423
Business transformation non-recurring costs (3)3343,5191,07411,113
IPO related costs (4)2352,992
Adjusted EBITDA11,27213,11842,61839,473
Adjusted EBITDA as a Percentage of Gross Profit(5)17.3%24.9%21.2%22.8%
Reconciliation of Net Loss to Adjusted Net Income    
Net loss(2,214)(859)(17,323)(17,209)
Amortization of intangible assets.3,2814,3499,77910,676
Equity-settled share-based compensation and other costs (1)4981,05729,1809,310
Non-recurring compensation and other costs (2)1636336821,423
Business transformation non-recurring costs (3)3343,5191,07411,113
IPO related costs (4)2352,992
Related party debt interest (6)9841,7372,888
Subordinated debt interest (6)255446747
Interest expense (recovery) on accretion of non-interest
bearing notes (7)
Extinguishment of deferred financing fees (8)1,621
Unrecoverable withholding taxes (9)1,035
Loss on lease modification (10)1,1841,184
Foreign exchange loss (gain) (11)4,044(3,982)(1,680)4,200
Tax recovery on deferred tax liability (12)(2,863)
Related tax effects (13)(1,911)(2,054)(8,021)(7,672)
Adjusted Net Income5,6143,99819,96315,638
Weighted Average Number of Shares (Basic)59,070,38045,039,54951,366,38945,126,350
Weighted Average Number of Shares (Diluted)63,447,11756,452,75555,743,12656,539,555
Adjusted EPS (Basic) (14)
Adjusted EPS (Diluted) (14)

Notes (Refer to the Q3 2021 MD&A for description of the bolded items and sections with parentheses within these Notes)

(1) These expenses represent costs recognized in connection with the Legacy Option Plan and the new Omnibus Long-Term Equity Incentive Plan (see Note 10 in the Interim Financial Statements for additional details), pursuant to which options granted are fair valued at the time of grant using the Black-Scholes option pricing model and adjusted for any plan modifications. Included in YTD 2021, there was $16.9 million relating to certain payments made in connection with extinguishment of certain equity-based entitlements (the “Cash-Out Agreements”) in conjunction with the IPO. Other costs relate to the employee investment plan and the long-term profit-sharing plan, which were dissolved upon the completion of the IPO, and fair value adjustments in relation to existing equity-based arrangements. As a result of the IPO, a $6.1 million fair value adjustment was triggered on an existing equity-based arrangement which was dissolved thereafter. See “Share Information Prior to the Completion of the Offering”.
(2) These expenses include compensation costs relating to severance and a one-time accrual recorded in Fiscal 2020 associated with the set-up of a new corporate vacation policy. Other costs are comprised of professional, legal, consulting, accounting and management fees that are non-recurring and are sporadic in nature as they primarily relate to costs incurred in connection with shareholder distributions.
(3) These costs relate to the implementation of Project Monarch which were largely comprised of one-time third-party consulting expenses, personnel costs for dedicated internal resources and software related costs. All costs relating to Project Monarch were segregated for tracking purposes and are monitored on a regular basis. As at September 30, 2021, $48.7 million has been invested in operating and capital expenditures for Project Monarch. See “Summary of Factors Affecting Performance – Business Transformation (Project Monarch)”.
(4) In connection with the IPO, the Company incurred expenses related to professional fees, legal, consulting, accounting and compensation that would otherwise not have been incurred and therefore are non-recurring. These costs have been separately identified and adjusted for clarity. There were $253 of IPO related costs which were incurred in Q1 2021 that were previously classified under non-recurring compensation and other costs; these costs have been reclassed into IPO related costs in YTD 2021.
(5) Adjusted EBITDA as a Percentage of Gross Profit is calculated as Adjusted EBITDA divided by gross profit. See “Non-IFRS Measures – Adjusted EBITDA and Adjusted EBITDA as a Percentage of Gross Profit”.
(6) Related party and subordinated debt interest was settled at the time of Offering. For additional details see “Related Party Transactions”, “Subordinated Debt Information” and “Share Information Prior to the Completion of the Offering”.
(7) This represents the expense relating to the accretion of the present value of the non-interest bearing notes recognized over the term of the notes. These notes were settled at the time of Offering. See also “Related Party Transactions”, “Subordinated Debt Information” and “Share Information Prior to the Completion of the Offering”.
(8) As a result of the refinancing, the unamortized balance of the deferred financing fees on the former revolving credit facility and term credit facility of $1,621 were extinguished in Q2 2021.
(9) Non-controlling interest portion of unrecoverable withholding taxes on royalties. Non-controlling interest was eliminated upon the IPO of the Company.
(10) Loss on lease modification recognized in Q3 2021 as a result the recognition of a sublease receivable for an office space that has been subleased and the corresponding derecognition of a right-of-use asset associated with this space.
(11) Foreign exchange (gain) loss includes both realized and unrealized amounts.
(12) Tax recovery on deferred tax liability as a result of tax rate change due to change from Canadian Controlled Private Company to public company.
(13) This relates to the tax effects of the adjusting items, which was calculated by applying the statutory tax rate of 26.5% and adjusting for any permanent differences and capital losses.
(14) Basic Adjusted EPS is calculated using the weighted average number of shares outstanding during the period. Diluted Adjusted EPS includes the dilutive impact of the stock options in addition to the weighted average number of shares outstanding during the period. See “Non-IFRS Measures and Other Measures – Non-IFRS Measures – Adjusted Net Income (Loss) and Adjusted EPS”.

1 Forward-Looking Statements

This news release contains “forward-looking information” within the meaning of applicable securities laws in Canada.

Forward-looking information may relate to our future business, financial outlook and anticipated events or results and may include information regarding our financial position, business strategy, growth strategies, addressable markets, budgets, operations, financial results, taxes, dividend policy, plans and objectives. Particularly, information regarding our expectations of future results, performance, achievements, prospects or opportunities or the markets in which we operate is forward-looking information. In some cases, forward-looking information can be identified by the use of forward-looking terminology such as “plans”, “targets”, “expects” or “does not expect”, “is expected”, “an opportunity exists”, “budget”, “scheduled”, “estimates”, “outlook”, “financial outlook”, “forecasts”, “projection”, “prospects”, “strategy”, “intends”, “anticipates”, “does not anticipate”, “believes”, or variations of such words and phrases or statements that certain actions, events or results “may”, “could”, “would”, “might”, “will”, “will be taken”, “occur” or “be achieved”. In addition, any statements that refer to expectations, intentions, projections or other characterizations of future events or circumstances contain forward-looking information. Statements containing forward-looking information are not historical facts but instead represent management’s expectations, estimates and projections regarding possible future events or circumstances.

Forward-looking information may include, among other things: (i) the Company’s expectations regarding its financial performance, including among others, net sales, gross profit, expenses, Adjusted EBITDA, Adjusted Free Cash Flow Conversion and operations; (ii) the Company’s expectations regarding industry trends, growth of our addressable market, overall market growth rates and our growth rates and growth strategies; (iii) our ability to maintain a highly predictable and visible net sales outlook; (iv) our business plans and strategies; (v) the continued success of our commercial model; (vi) our expectations regarding growth in our customer base, our ability to retain customers and increase margin per customer; (vii) acceleration in growth of and adoption of new technologies; (viii) our relationship with our technology partners; (ix) our ability to continue to attract and retain talent; (x) our competitive position in our industry; (xi) our intention to declare dividends; (xii) and the long-term impact of COVID-19 on our business, financial position, results of operations and/or cash flows.

Forward-looking information is necessarily based on a number of opinions, estimates and assumptions that we considered appropriate and reasonable as at the date such statements are made, and are subject to known and unknown risks, uncertainties, assumptions and other factors that may cause the actual results, level of activity, performance or achievements to be materially different from those expressed or implied by such forward-looking information, including but not limited to the risk factors described in our Q2 2021 MD&A and under “Risk Factors” within the Prospectus. A copy of the Prospectus can be accessed under our profile on the System for Electronic Document Analysis and Retrieval (“SEDAR”) at and on our website at There can be no assurance that such forward-looking information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, readers should not place undue reliance on forward-looking information, which speaks only as at the date made.

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