Thank you. Good morning and thank you for attending today's Q1 earnings call.

Those of you who recently participated on the 2021 full-year financial results will have noted that Converge exceeded Street expectations with record Q4 revenues growing 74% year-on-year despite industry-wide backlogs. Additionally, the company reported an annual increase in managed services revenue of 33% as well as 52% increase in professional and other service revenue and grew its gross revenue by 9.6%.

Converge's financial success over the past few years has resulted overall in a 49% three-year annual compound growth rate in revenue, while the three-year adjusted EBITDA compound growth rate was 79%. We also reported adjusted EPS of $0.35 and an increase of 26% from 2020.

Over the first quarter of 2022, Converge has built upon this success by reporting net revenue growth of 77% year-on-year, including growing its Q1 professional and other services by 70% year-on-year. The company also reported a 60.8% year-over-year growth in gross profit alongside a 58% increase in adjusted EBITDA.

Many of you are well aware of the industry-wide backlogs as discussed on our Q4 earnings call and as widely reported by analysts across the industry. In Q4, we reported an increase in the product backlog to approximately $350 million compared to $250 million in Q3 2021.

While our reported backlog has further increased to $472 million this quarter, it is important to note that $250 million worth of that Q4 backlog was delivered this quarter and invoiced leaving $100 million of open orders carrying forward from Q4 into Q1. In Q1, our sales team impressively generated an additional $372 million in new backlog orders, which when added to the $203 million of net new invoice orders, equates to roughly $575 million of product demand generated in the first quarter of 2022.

As I've noted previously, the company remains extremely confident in its ability to manage its supply chain, and we're using our strong balance sheet and influence to ensure that we are prioritized when products become available. We continue to view our backlog as deferred revenue rather than loss revenue and expect to see further growth in higher margin professional and other services in the next 12 months, as supply chains lessen and backlog is delivered to end users.

Generally, assuming that the supply chain issues normalize in line with historical levels, we anticipate that we can achieve strong double-digit organic growth. In the meantime, our sales team continue to push higher margin business offerings least affected by supply chain constraints, while working closely with our vendor partners on delivering expectations and solutions.

Converge's sales and marketing teams organized 30 client-facing events with 25 partners featured over 600 external attendees, helping to drive 111 net new logos in Q1 of 2022. Regarding acquisitions, Converge acquired $742 million of gross revenue in North America and Europe through 2021 through nine acquisitions, which advance the Converge cybersecurity, advanced analytics and managed services practice areas.

Let me take this opportunity to remind everyone that Converge intends to add $1 billion of gross acquisition revenue in each of the next three years, contributing to the Phase 4 goal of over $5 billion of run rate revenue by the end of 2025. In 2022, Converge has already closed approximately $399 million of last 12 months gross revenue and $29.4 million of adjusted EBITDA.

Including recent strategic acquisitions, Converge has grown to over 300 salespeople, supported by over 750 technical resources, including growing our security practice to 103 individuals and our data analytics practice to 85. In addition to our recent acquisitions, Converge recently announced the launch of a new service product, Converge Enterprise Cloud for IBM Guardium Insights; a cloud agnostic hosted and managed solution for data security and compliance.

This new offering will allow clients to begin operations quickly automate data compliance and security value, manage risk more effectively, and transaction from standard monitoring to active threat detection. CECIGI strategically advances our mission to help companies modernize their security programs.

With that being said, I would like to pass the call to Matt Smith to discuss our Q1 financial highlights and successes in further detail.

Thank you, Shaun. As Shaun mentioned, despite ongoing backlog challenges, we continue to generate strong revenue demand and revenue growth.

In Q1 we grew net revenue 77% to $550 million compared to $310.2 million in Q1 last year. Q1 product revenue, which includes hardware and software, increased 80% to $453.3 million from $252.5 million over Q1 last year.

Our product revenue growth was driven primarily by the 10 acquisitions completed since April 1 last year, including the PDS acquisition that we closed at the beginning of the year, as well as higher sales of devices to the Canadian government. Q1 professional and other services, which includes the net revenue from public cloud resell and product support, increased 70% to $70.2 million from $41.3 million last year.

We attribute this growth primarily to increases in professional services associated with upfront configuration and integration services for on-premise projects that were previously on hold due to COVID as well as continued growth in our consulting practice areas, including analytics. In Q1, we grew our net revenue from managed services, which are long-term contracts 61% to $26.4 million from $16.4 million in Q1 last year.

On an annualized recurring basis, our ARR for managed services at the end of Q1 grew to $105.8 million compared to $65.5 million last year. We are proud of the fact that we've achieved the milestone of $100 million in managed services ARR that we set out last year and are poised to show continued growth in this area in 2022 as backlog is delivered and we realize revenue for managed services over end user devices.

At the end of Q1, our total gross recurring revenue was $423.4 million made up of $109.6 million from public cloud, $208 million from software subscription, and $106 million for managed services that I just mentioned. And as Shaun has highlighted at the beginning of the call, despite the number of acquisitions we completed in the last 12 months, we still managed to grow gross revenue organically by 7.2% in Q1 compared to last year.

As highlighted on our Q4 call, we attribute this growth to two key things. One, our -- sorry, our ability to seamlessly integrate our acquired companies; and two, the strength and breadth of our various practice areas, including our cyber -- cybersecurity, which we recently bolstered with the acquisition of CBI that we announced on April 1.

As a reminder, we calculate organic growth for those companies that Converge's own for at least three months at the reporting date, based on that pro forma gross revenue in the current period as compared to the same period last year. We believe that the three-month rule provides a good representation of the acquisition under Converge ownership.

And in doing so, we can then begin to evaluate the acquired company from an organic growth standpoint. For Q1, our gross profit increased 60.8% to $109 million from $67.8 million for the same period in 2021.

And gross profit margin was 20% compared to 22% last year. Our gross margin percentage for Q1 is lower due to the fact that we've acquired 10 companies since April 1 that sells proportionately more hardware, and initially generate margins below 20%.

Plus, Q1 was a device heavy quarter, both driven by higher device sales to the Canadian government and device backlog delivered to customers in Q1, which are lower margin. Going forward, as we cross-sell higher-margin cloud and managed services to customers of these companies, including the margin left associated with the trailing services on product backlog and increased sales for existing customers, we expect gross margins to increase.

Q1 adjusted EBITDA increased 58% to $29.6 million compared to $18.8 million last year. As a percentage of revenue adjusted EBITDA was 5.4% compared to 6.1% in Q1 last year.

As a percentage of gross profit or GP, which we believe to be a telling indicator of the company's overall operating efficiency and profitability, adjusted EBITDA was 27.2% in line with 27.7% in Q1 last year. Our EBITDA margins in the interim is a direct results of the product mix highlighted above, as driven by recently acquired companies and the impact of lower margin devices delivered in the quarter.

As we integrate operations of acquired companies and cross-sell managing cloud services to the customer base, and increase our gross profit with higher margin revenue, we would expect these measures to increase over time. Looking at our balance sheet, we finished the quarter in strong cash position with over $217 million of cash on hand, with approximately $140 million in borrowing capacity under our ABL, and are well-positioned to continue to execute on our acquisition targets in the balance of 2022.

In Q1, we utilize the strength of our balance sheet and cash generation to purchase product directly from our OEMs in order to secure supply for customers, which as Shaun mentioned, allowed us to invoice and deliver on $250 million in backlog from Q4 and an additional $203 million of net new orders in Q1. This impact of pursuing direct from OEMs rather than through our typical channel partner is reflected in our uses of working capital in the quarter.

However, as supply chains lessons; we will increasingly revert back to our regular channels and expect working capital to be a source of cash consistent with prior quarters. Lastly, in Q1, our adjusted free cash flow which we calculate as adjusted EBITDA less recurring capital expenditures and payments of lease liabilities was $24.2 million, increasing from $14.7 million in Q1 last year.

Adjusted free cash flow conversion, which should be expressed as a percentage of EBITDA was 82% in Q1, increasing from 78% last year. We believe that adjusted EBITDA is a good proxy for cash generation and as such adjusted free cash flow conversion is a useful metric that demonstrates the rate at which the company can convert adjusted EBITDA to cash.

The increase in these measures is attributable to the company's strong continued adjusted EBITDA growth and effective management of working capital while generally maintaining low CapEx requirements. And with that, I'll turn the presentation back to Shaun.

Thanks, Matt. Overall, the leadership team at Converge remained confident in our ability to achieve objectives outlined for the year ahead.

With our success in Q1 being a strong indicator of our solid trajectory. We strategically added to the Converge leadership team to further enhance the scale and success of our company's vision, including the addition of John Teltsch, as Chief Revenue Officer, who is a Senior Executive bringing more than 40 years of leadership and growth experience to this role.

John joined Converge following a decades long career with IBM. Most recently he is General Manager of Technology Sales across the U.S., Canada and Latin America.

Additionally, Converge announced the appointment of Richard Lecoutre to the Global CFO in Q1, who is currently serving as a Finance Director at Softcat PLC. During his tenure at Softcat Richard was integral to Softcat's 2015 IPO and growing their market cap to $3.1 billion.

Richard will start his role at Converge on September 1st and will be a valuable asset to the company in its continued global expansion and evolution. Touching based on some of our exemplary existing leadership.

I'm extremely pleased to highlight Rochelle Manns being recognized as Ingram's first Woman in Cloud Female Leader of the Year award. Rochelle is our VP of Cloud Platforms and has driven an exponential growth in our cloud business.

This award recognizes Rochelle's talent and showcases one of the exceptional women who are driving Converge's growth. At Converge, we take pride in offering resources and initiatives for employees to successfully grow together, strengthening the over company culture.

Our Women for Women empowerment group continues to give the identified female population at Converge the time to invest in leadership development by hosting motivational speaking events, including a chat with Deborah Danielson, what I learned on the path to the boardroom, book clubs and empowering discussions. Subsequent to Q1, we launched our social ambassador program companywide to encourage employee engagement with Converge content on social media channels with intent to generate increased visibility.

And in honor of Earth Day, we have partnered with Cisco hosting our first Green Program Event focused on how the pandemic has affected the way we work, and how companies and individuals can sustainably prepare for the more permanent move to hybrid work. Other exemplary initiatives within Converge include our diversity and inclusion council that strives to ensure equality within the workplace, offering insightful training and discussions including our upstand -- our upcoming by standard training, See Something Say Something Event.

Along with wellness programs focused on healthy lifestyle choices for the mind and body, and most recently, highlighting May as Mental Health Awareness Month, offering creative tools to help manage stress. We believe these initiatives continue to contribute to the overall employee wellness that corresponds to a positive company culture, and successful employee performance, allowing Converge to be better together.

On that note, let me open the floor to questions.

Hi, good morning. So the first question I want to ask on the gross margin mix.

And you detailed some of the reasons why it was a little lower than previous quarters and in the Q1 quarter. But outside of the hardware mix is there anything you'd callout and do you see this gross margin profile normalizing as soon as Q2 or could some more devices come through other factors outside in Q2?

Yes. Sorry.

Good morning Christian. Yes, we would expect gross profit in Q2 to be kind of 2% to 3% higher than Q1 because of the stronger software sales; Q2 and Q4 tend to be much stronger software sales month.

Q1 is as Matt was saying, has a lot of devices. So in the hardware side, the device part is the lowest margin piece.

And the trailing part, as Matt indicated, is the managed services piece, which adds higher margin. So you would expect, yes, Q1 historically, you've seen is always lower kind of gross profit.

And particularly this year with the unlocking of the device part of the supply chain, you saw that go down to 20%. But you would expect it to be more than 22%, 23% range for Q2.

Okay, perfect. And then you touched on seasonality there.

And I was just wondering if the ordinary seasonality trends are intact so the Q2, Q4 a little stronger, or do you see the curve or pattern could slot in a bit with either supply chain or recent M&A?

So that's a great question. So what we're seeing now is in a normal supply chain, everything you ordered in the quarter pretty much delivered in the quarter.

Now we're seeing that. And so basically what happened in Q1, two-seventh of our supply chain didn't invoice the rest did.

So that's probably a good metric to kind of use for the Q1 backlog of how much that's an invoice. Anything that was ordered in April that's outside of the kind of network and HPE probably will deliver as well.

And then certain vendors haven't really been impacted as vendors like IBM. And also, and of course any software gets delivered.

But you're seeing kind of what used to be a much quicker cycle. Things that are now ordered in kind of May and June are more likely to be delivered in July and August.

Traditionally July and August are very light as people are on vacation. So I would expect to see as the supply chain unwinds, a stronger Q3 than you had saw especially, you got to remember we bought $400 million of acquisition revenue in Q1, we've indicated that there'll be a strong Q2 component to acquisition revenue.

And that's all going to be in Q3 and Q4. So you would definitely expect a large ramp up of revenue, gross profit, and EBITDA in Q3, but particularly Q4, and again, because of the -- like the demand in Q1 was off the charts, right.

And so like $575 million of products demand. And so you're seeing an incredibly strong demand environment around digital transformation, which is kind of equating to just the unwinding of the supply chain with that demand means that Q2 is going to be strong, but Q3 and Q4 will be very strong as well.

Okay, perfect. I will ask one last question storing the product size and supply, would you say there's any differences sourcing products in the U.S.

or Europe is there any dynamic you've seen there? Or under the Converge sort of umbrella, have you not found any differences getting product from vendors?

So size definitely matters. And our strong balance sheet meant that we were able to do things like go directly to the OEMs to purchase product rather than going through distribution in order to prioritize ourselves ahead of smart players.

So definitely your -- the size and relationship with your vendors is incredibly important in prioritizing supply. We are obviously; we do a lot more volume in North America than we do in Europe.

But still those vendors are international vendors and our relationships are with the top executives. So there are definitely some differences in Europe versus North America.

But the fact that Converge is so large is definitely helpful.

Perfect. Thanks for taking my questions.

Shaun, I will pass the line.

Thanks.

Thank you very much and congratulations on the quarter, tremendous revenue on the quarter.

Thank you.

On that point of the tremendous revenue on the quarter, beating expectations of product demand, beating expectations, can you talk to what you might be seeing heading into Q2 and your response to the prior question left me seeking that there could be a bit of a backlog flushing coming through Q3 and a greater flushing coming through Q4?

Yes, definitely. So again, I'd say I think when you look at what our $475 million of product revenue, I think the two-seventh rule probably is a decent one to look at what Converge there.

And then again, we've seen this incredible demand cycle though, that's the key thing I would take away from the Q1 like purchase order demand is that digital transformation demand is incredibly strong. And so that's the combination of the flushing of the supply chain, but that renews.

But you're seeing combined with that anything I'm getting a lot of the things that gets ordered in into will end up in the backlog for at the end of Q2. So high demand that you're seeing, as well as the conversion of the backlog.

So in Q1, we also invoiced $203 million of purchase orders we received in the quarter, but had $272 million, added to the backlog. So those probably percentage wise are decent proxies to use for Q2 as well.

Okay. And certainly when you were going to the OEMs to source product, and you're basically going front of the queue, going direct to OEM using your balance sheet, is there any impact there on margin, so you are getting the product, but maybe the margin isn't quite what it would be going through your traditional vendor routes?

No, it's not the margin. It's the terms.

So you have to pay more quickly like 45 day terms rather than distribution we pay on 75 day terms. So that's the -- you'll see it in the working capital numbers, which again we'll expect to normalize later in the year.

So it's not on margin, it's on terms.

Hi, good morning. Maybe just a little farther on that last question from Rob, when you're going direct to the OEMs, so it seems to me that you're giving up some of the price discounting that you would get through your distributors on volume.

So wouldn't that be a -- wouldn't that be a margin pressure in the short run if you're going direct to the OEMs?

Yes, not on devices. So you don't receive the same benefits, data center equipment is very different than the end user device market, which is traditionally lower margin as well.

So yes, there hasn't been a change in either the pricing or the benefits. But just the big difference is terms.

Okay, that's good to know. The managed service target of $200 million for exiting the year, long way to go.

And I'm just curious if you could give us a sense of, how you remain confident on hitting that target?

So we're going to spend a lot of time on our June 23 AGM call going through our model, but you'll see a lot of investments we're making in managed services, you saw the IBM Guardium security managed service announcement, there will be a lot of initiatives around our managed services that will contribute to getting to there, as well as the acquisitions that we're doing. We're very disciplined on the prices that we pay for them.

But given that we're one of the few buyers in the market now, we're able to get a lot more services and managed services as part of our acquisitions than we were traditionally. So I would expect a large contributor to that to $200 million managed services target will also be through acquisition.

Okay, and maybe last question, the orders that you highlighted had gone directly into the backlog, I think 370 is the number you gave, is all of that driven by supply chain, I assume all of is driven by supply chain, but is it are you seeing longer duration orders or customers starting to give you multi quarter orders to try and get ahead of the demand? Or is it just really all fulfillment bottlenecks?

That's a bottleneck. Again, it's improved from and Q3 was the worst last year, right, you were looking at delays of four to six months for a lot of the products, what improved is the vendors that had some of the issues on the device side have come down to two to three months, which traditionally, that would more to be four, six weeks.

So that's why I'm saying that you're seeing normally, if you were in the last month of the quarter, orders that are made at the beginning of that month, and say early June would be delivered in Q2. Now you'll see things in May and June, for certain vendors will end up being Q3 deliveries, but we're not seeing vendors, we're definitely pushing them to order earlier.

But these are all PO based. And so these are things that don't get cancelled there because they're committed to.

So again, you're seeing that conversion happen. It's just a different conversion cycle than you would have seen in previous years.

And when you say PO based, you're -- the company making the order with you is on the hook for completing that order, they can't back away from it. They can't cancel that order is that --?

That's correct.

Currently making there.

That's correct, yes.

Hi, good morning. Can you talk a little bit about whether you've seen any headwinds from the general macro environment and how we should think about the business in the context of a recessionary environment?

So when you see companies like Accenture, CGI, Tata, Softcat, Aquantia all showing incredible growth, digital transformation demand has not changed. And so when you actually look at the sources of information on that, consumer demand is changed.

So I noticed that say Foxconn who produces Apple's devices has moved more production from iPhones to iPads, which has helped part of the supply chain for iPads. So but demand has remained very strong.

Again, if you look at the numbers from Q1, demand was much larger than historical Q1s. We are seeing that trend continue into Q2, and there's no reason to think that that won't continue in a recessionary environment, digital transformations that is incredibly large.

Okay, thanks for the color. And then a sale to the government was mentioned a few times in the prepared remarks.

Just wondering if there's any additional color you can give us on that.

So our education obviously is very government focus, more provincial government or in Germany, in the state government. We also have in certain countries, healthcare is considered government.

So but yes, so the government spending like Hadley that has not changed at all. So there was some commentary out there about especially in Germany, about the change in government last year, expecting some spending patterns that at the Federal level, we have zero exposure to the German Federal Government, all of our spend in Germany is around education, which is state demand generated.

And so yes, that has been very strong. We have seen no change at all in the ordering from our government sources.

And so, yes, that has not changed at all.

Great, thanks. And just finally coming on the hardware side, just curious about the split of the business between the networking equipment and devices?

So, data center is probably the majority of it. And when you see the part of our backlog that did not convert the $100 million that will be primarily network in HPE.

So let's say that gives you kind of a percentage, but the majority of our hardware is multi data center equipment.

Hey, good morning. We're hearing more and more software and hardware vendors talking about increasing prices?

So certainly seems like inflation in technology spending continues to rise here. Can you just discuss how that influences, both your revenue and gross profit percentage and maybe any nuances in the mid-market versus enterprise?

Yes, Gavin, great point. So the large enterprise tends to be cost plus.

And so they feel those things more dramatically. Mid-market is more service oriented than being price oriented.

So there's much less impact in the mid-market than there is in the large enterprise around those pricing changes.

Perfect. And if we look at your recent M&A, it seems more kind of services heavy, like kind of similar valuations to some of the hardware acquisitions you were doing before.

When you look into your M&A pipeline do you think that trend can continue and anything you'd point out on valuation for private companies just given the ongoing market turbulence we've seen here?

Yes, Gavin, that's a great point. So CBI had 8%, EBITDA margins.

IDX is 14%, we're buying these services companies, and yet we're buying them for Converge, as I mentioned very disciplined in what we pay and so that kind of 5x, 6x EBITDA for those kinds of companies. What we're seeing now is people that have to either raise capital or issue equity as part of an acquisition are no longer in the acquisition game.

And then the private equity guys who needed debt in an increasing rate environment, they're back as well. So the amount of inbound companies that we're looking at that we're getting is definitely risen.

We are one of the few, or we have a very strong balance sheet, then we could continue to pursue our acquisition strategy. So we're able to buy at Converge discipline prices, companies with much more services and managed services than we would be in a more competitive environment.

Good morning, guys. Shaun I was wondering, just on the backlog.

Appreciate the color there. Do you expect, it sounds like do you expect that backlog to tail off in the second half of this year?

But can we see that drop a bit in Q2?

So what you're going to see though is, as I mentioned, orders from certain vendors that come in May and June will not convert in the quarter when in a normal year, they would. So I expect to see a high conversion rate of our existing backlog.

But we have this incredible demand cycle that is uncharacteristic that we're seeing in the industry now. In addition to that, when you look at Q2, it tends to be much more software centric, Q2 and Q4 are very software centric.

And obviously, there's no backlog associated with software. So you will see those pieces get delivered, but you will see a strong addition.

So you'll see a cleansing of the backlog, but a lot of increase in the backlog from orders from certain vendors in May and June.

Okay. And then just on the M&A pipeline, if you can provide an update there.

Last quarter, you talked about closing three in North America exiting Q1, and you had two of those across the finish line, and then another four in Europe. So just curious what the status of that pipeline is?

Yes, so you would expect as we said, the majority of that $1 billion of acquisition revenue that we target each year to happen in Q2, and I do realize data so you would expect to hear things soon.

Good morning, guys. Wonderful quarter.

So Shaun, talking about this acquisition discussion here can you provide some more color on the EBITDA margin expectations? And you talked about it, but if you could just provide more color as you continue to acquire some of these high margin companies and how would Converge's EBITDA margin kind of evolve with that?

So yes, great question. There's two different types of acquisitions that we make the PDSs of the world which are more customer focused.

And there's another large one coming as well, versus the capabilities one. So CBI, which is nearly 110 million of security software and services doesn't really have a hardware component.

The difference is, when we do the math around, when you buy 3% EBITDA companies, we add a percent and a half of volume rebates and have 2% of cost renewable. That's the way we get a 6.5%.

The services companies that's more adding to the cross-selling capabilities of our existing base, and the security practice the app modernization practice, the analytics practice. So that's what those capabilities are being extended into our other customers.

So there's kind of a two categories of it. And so you'll see like the ones that are in the kind of 3% to 4% EBITDA margins, those of it we're buying them for customers, and you get that traditional benefit, the ones that are services released on the cross-sell that receiving the benefit.

Perfect. Moving on to slightly different product mix here.

So you did mention that obviously, a lot of backlog still includes network gear and data center equipment tends to be one of the more -- one of the prior -- bigger backlog basically is what it is. What I'm trying to get to is a lot of the world is moving towards cloud.

So how do you see this particular product suite evolving? And, kind of moving away from the data center equipment delivery, more towards the cloud-based and service-based product in the long run?

Yes, that's what digital transformation is. We're moving people from data centers to cloud.

And when you do that, there's always an increase in network spend for that, but a lot of the offerings that we're offering around managed services, so manage end user around devices, and transitioning people, but also the service offerings that we have, that's exactly what you see in the growth of the services and managed services that Converge as offers. And while we point to our target $200 million of managed services by the end of the year, that's the real opportunity to increase those high margin services and managed services.

So we are actually part of that, but don't think the data center spend is all of a sudden going to disappear. So when we're providing these workload transformations to the cloud, we're also helping them provide existing services to the data centers as well.

Thank you to everyone for your continued support and participating on the Converge first quarter's earnings call. The Converge management team looks forward to your attendance at our Annual General Meeting coming up on June 23 at 11:00 AM Eastern.

Thanks all.