Softchoice (SFTC) Q3 2024 earnings summary

Executive summary

• Achieved double-digit organic growth in Q3 2024, with gross profit up 8.9%–10% year-over-year, driven by strong Software & Cloud and Services performance, recurring SaaS/cloud gross profit, and market share gains.

• Customer base expanded over 4% in Q3 and 5% over the last 12 months, with a 105% revenue retention rate and increased salesforce investment.

• Launched the SAM+ Hub, a proprietary software asset management tool, with over 1,000 customers using it since September, driving customer engagement and acquisition.

• Recognized for workplace excellence, ESG leadership, and as Cisco Canada's Commercial Impact Partner of the Year.

• Strong Microsoft partnership, with CSP revenue up over 50% in 2023 and expected to rise 25% in 2024.

Financial highlights

• Q3 2024 gross profit: $85.2M, up 8.9% year-over-year; gross profit margin was 13.6% of gross sales.

• Adjusted EBITDA grew 2%–2.2% in Q3, with margin stable at 27.3% of gross profit.

• Adjusted EPS (diluted) was $0.18, down from $0.27 or $0.23 in Q3 2023, due to higher taxes and financial expenses.

• Net income per share (diluted) was $0.15, up from $0.14 in Q3 2023.

• Free cash flow for the trailing twelve months declined to $33M from $62M, mainly due to higher taxes and expenses.

Outlook and guidance

• Confident in achieving 2024 objectives for market share and returning to historical top-line growth rates, with continued organic growth and margin expansion targeted.

• Q4 expected to be seasonally lower, around 26% of full-year gross profits, due to timing of incentives and hardware orders.

• Dividend per share increased by 18% over Q4 2023, reflecting confidence in future cash flows.