PowerPoint Presentationm.softchoice.com/files/pdf/about/AGM2010presentation.pdf · Current Low...

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Investor Presentation May 2011

Transcript of PowerPoint Presentationm.softchoice.com/files/pdf/about/AGM2010presentation.pdf · Current Low...

Page 1: PowerPoint Presentationm.softchoice.com/files/pdf/about/AGM2010presentation.pdf · Current Low Valuation – Market Still Catching Up to Softchoice Positioning 41 P/E Ratios 2011E

Investor Presentation May 2011

Page 2: PowerPoint Presentationm.softchoice.com/files/pdf/about/AGM2010presentation.pdf · Current Low Valuation – Market Still Catching Up to Softchoice Positioning 41 P/E Ratios 2011E

Forward Looking Statements

This presentation material does not constitute an offer to sell nor a solicitation to buy common shares of Softchoice Corporation. The same is being disseminated for information purposes only.

In the interest of providing Softchoice shareholders and potential investors with information regarding the Company, including Management’s assessment of the Company’s future plans and operations, certain statements throughout this report are ‘forward-looking statements’ and represent the Company’s internal projections, estimates or beliefs concerning, among other things, future operating results and various components thereof of the Company’s future economic performance.

The projections, estimates and beliefs contained in such forward-looking statements necessarily involve known and unknown risks and uncertainties which cause the Company’s actual performance and financial results in future periods to differ materially from any estimates or projections of future performance or results expressed or implied by such forward-looking statements.

We also use the terms “Imputed Revenue”, “Total Imputed Revenue” and “EBITDA”. These are non-GAAP measures. Please refer to our MD&A for an explanation of these terms.

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Page 3: PowerPoint Presentationm.softchoice.com/files/pdf/about/AGM2010presentation.pdf · Current Low Valuation – Market Still Catching Up to Softchoice Positioning 41 P/E Ratios 2011E

Agenda

• Chairman’s Message

• Business of the Meeting

• CEO’s Message

• Financial Review & Strategy Going Forward

• Questions

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Page 4: PowerPoint Presentationm.softchoice.com/files/pdf/about/AGM2010presentation.pdf · Current Low Valuation – Market Still Catching Up to Softchoice Positioning 41 P/E Ratios 2011E

Welcome & Chairman’s Message

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Bill Linton Chairman of the Board

Page 5: PowerPoint Presentationm.softchoice.com/files/pdf/about/AGM2010presentation.pdf · Current Low Valuation – Market Still Catching Up to Softchoice Positioning 41 P/E Ratios 2011E

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Welcome

Page 6: PowerPoint Presentationm.softchoice.com/files/pdf/about/AGM2010presentation.pdf · Current Low Valuation – Market Still Catching Up to Softchoice Positioning 41 P/E Ratios 2011E

Annual General Meeting May 2011

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Page 7: PowerPoint Presentationm.softchoice.com/files/pdf/about/AGM2010presentation.pdf · Current Low Valuation – Market Still Catching Up to Softchoice Positioning 41 P/E Ratios 2011E

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Business of the Meeting

Business of the Meeting

Page 8: PowerPoint Presentationm.softchoice.com/files/pdf/about/AGM2010presentation.pdf · Current Low Valuation – Market Still Catching Up to Softchoice Positioning 41 P/E Ratios 2011E

Annual General Meeting May 2011

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Page 9: PowerPoint Presentationm.softchoice.com/files/pdf/about/AGM2010presentation.pdf · Current Low Valuation – Market Still Catching Up to Softchoice Positioning 41 P/E Ratios 2011E

CEO’s Message

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David MacDonald President & CEO

Page 10: PowerPoint Presentationm.softchoice.com/files/pdf/about/AGM2010presentation.pdf · Current Low Valuation – Market Still Catching Up to Softchoice Positioning 41 P/E Ratios 2011E

Softchoice at a Glance

• Leading N.A. provider of IT solutions and services: – Software, hardware, solution design and services

• 46 local offices & 4 regional call centers

• Key 2010 Financials – Revenue: US$884M (17% growth) – Gross Profit: US$164.6M (19% of rev) – EBITDA: US$41.2M (4.7% of rev) – Cash: US$35.8M – Debt: US$12.7M

• Market cap: ~US$180M

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Page 11: PowerPoint Presentationm.softchoice.com/files/pdf/about/AGM2010presentation.pdf · Current Low Valuation – Market Still Catching Up to Softchoice Positioning 41 P/E Ratios 2011E

Percent of Revenues through the Channel

(2010)

Softchoice Role

2010 Softchoice Large Account Reseller

(LAR) Ranking

D I D Y O U K N O W ?

Partners Play a Key Role In the Distribution Channel

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95%

93%

75%

1 of only

6 authorized

LARs across N. America

#1 in Canada

#5 in US

Page 12: PowerPoint Presentationm.softchoice.com/files/pdf/about/AGM2010presentation.pdf · Current Low Valuation – Market Still Catching Up to Softchoice Positioning 41 P/E Ratios 2011E

Entering a New Growth Era

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Accelerated Growth

2010+

Diversification

2002 – 2008

Invested for the Future

2009 – 2010

• Completed integration of 5 major acquisitions

• Repaid $41M in debt

• Added engineering & solutions resources

• Capturing transformational tech spending

• Leveraging infrastructure

Page 13: PowerPoint Presentationm.softchoice.com/files/pdf/about/AGM2010presentation.pdf · Current Low Valuation – Market Still Catching Up to Softchoice Positioning 41 P/E Ratios 2011E

Well-positioned in changing marketplace

T H E S I S

Well Positioned, Long Growth Runway

Well-positioned in changing marketplace

A differentiated business model

Delivering strong results

Going forward – powerful drivers

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W H A T W E D O

Softchoice Delivers Comprehensive IT Solutions

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PRODUCTS VALUE-ADDED

PROPOSITION

CUSTOMERS /

GEOGRAPHY

Microsoft: 45%

Server, Storage, Networking: 28%

Client Computing: 23%

Services: 4%

SMB: 43%

Enterprise: 35%

Government: 22%

• Assessment-led

• Broad product offering

• Solution design

• Services

• Efficient fulfillment

• Asset management

US: 56%

Canada: 44%

46 locations in N. America

Page 15: PowerPoint Presentationm.softchoice.com/files/pdf/about/AGM2010presentation.pdf · Current Low Valuation – Market Still Catching Up to Softchoice Positioning 41 P/E Ratios 2011E

Capabilities Provide Unique Positioning

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– Efficient supply chain – National scale – Complex Solutions

Low technical

complexity

High technical

complexity

Value

High number of customers

Low number of customers

Volume

National Resellers – CDW – DELL

Local Solution Providers – Presidio – Logicalis

Page 16: PowerPoint Presentationm.softchoice.com/files/pdf/about/AGM2010presentation.pdf · Current Low Valuation – Market Still Catching Up to Softchoice Positioning 41 P/E Ratios 2011E

Case Study: Value in Action

Customer

• RBC >$725B assets, Top 10 bank in N. America

Softchoice role

• Solutions for all PCs, printers, monitors, company-wide

– over 3,000 locations

– ship >30,000 units annually

Advantages we bring

• N. America-wide, highly efficient supply chain

• Excellent service

• Local presence in all key markets

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Page 17: PowerPoint Presentationm.softchoice.com/files/pdf/about/AGM2010presentation.pdf · Current Low Valuation – Market Still Catching Up to Softchoice Positioning 41 P/E Ratios 2011E

Market Poised for Growth

Key Drivers

• Windows 7

• Cloud

• Mobility

• Virtualized Data Center

Accelerating IT Investment

Cycle

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Page 18: PowerPoint Presentationm.softchoice.com/files/pdf/about/AGM2010presentation.pdf · Current Low Valuation – Market Still Catching Up to Softchoice Positioning 41 P/E Ratios 2011E

T H E S I S

Well Positioned, Long Growth Runway

Well-positioned in changing marketplace

A differentiated business model

Delivering strong results

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Going forward – powerful drivers

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A Differentiated Business Model

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1 Assessment-led approach

3 Broad solutions offering

5 Ensure loyal, repeat customers

4 Leverage low- cost, efficient infrastructure

c u l t u r e

2 Solutions design

Page 20: PowerPoint Presentationm.softchoice.com/files/pdf/about/AGM2010presentation.pdf · Current Low Valuation – Market Still Catching Up to Softchoice Positioning 41 P/E Ratios 2011E

Our Culture Drives Success

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Our Culture

• Grow talent from within

• Developmental programs spanning entry-level to senior management positions

• Career paths from the call center to field sales and sales and marketing leadership

Results

• High employee retention

• High productivity

• High customer satisfaction

87% of employees say they are proud to

work at Softchoice

Page 21: PowerPoint Presentationm.softchoice.com/files/pdf/about/AGM2010presentation.pdf · Current Low Valuation – Market Still Catching Up to Softchoice Positioning 41 P/E Ratios 2011E

Our Culture Drives Success

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$-

$10.00

$20.00

$30.00

$40.00

$50.00

$60.00

Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10

Gross Profit/Headcount

Softchoice

Insight

PCMall

PCCC

CIBER

Total Competitors

Engaged, highly motivated employees driving industry-leading productivity

Page 22: PowerPoint Presentationm.softchoice.com/files/pdf/about/AGM2010presentation.pdf · Current Low Valuation – Market Still Catching Up to Softchoice Positioning 41 P/E Ratios 2011E

1. Assessment-led Approach – Drives Scale

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Discovery Data Collection Analysis Recommendation

Proprietary Assessment Capabilities

• Networking • Storage • Server Workload • Desktop Virtualization

• Software Licensing • Systems Lifecycle • Cloud Readiness

Page 23: PowerPoint Presentationm.softchoice.com/files/pdf/about/AGM2010presentation.pdf · Current Low Valuation – Market Still Catching Up to Softchoice Positioning 41 P/E Ratios 2011E

2. Solutions Design

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Solutions Focus

• Server & Storage Virtualization

• Mobility

• Back up & Recovery

• Private Cloud

• Desktop Virtualization

• Unified Communications & Collaboration

Page 24: PowerPoint Presentationm.softchoice.com/files/pdf/about/AGM2010presentation.pdf · Current Low Valuation – Market Still Catching Up to Softchoice Positioning 41 P/E Ratios 2011E

3. Broad and Complex Solutions Offering

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Private Cloud Infrastructure

Security

Client PCs & Desktop Virtualization

Mobility

Collaboration Public Cloud

Page 25: PowerPoint Presentationm.softchoice.com/files/pdf/about/AGM2010presentation.pdf · Current Low Valuation – Market Still Catching Up to Softchoice Positioning 41 P/E Ratios 2011E

4. Leverage Low Cost, Efficient Infrastructure

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Leverage through Efficiency

• Exceptional cash flow

• Low working capital

• Highly Scalable model

• Single CRM platform

• Virtual Integration with suppliers

• Rich customer intelligence

Page 26: PowerPoint Presentationm.softchoice.com/files/pdf/about/AGM2010presentation.pdf · Current Low Valuation – Market Still Catching Up to Softchoice Positioning 41 P/E Ratios 2011E

5. Ensure Loyal Repeat Customers

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• Bricks and mortar presence – 46 locations, ‘live’ support

Why We Win

• Partner relations – Top-tier vendor relations / authorizations

• Excellence in service – Customer satisfaction

• Expertise – enterprise architecture group resources – Data center / private cloud solutions

• People relationships – Service culture / sales model

• Our sales model – Outbound and ISAM dual coverage

Page 27: PowerPoint Presentationm.softchoice.com/files/pdf/about/AGM2010presentation.pdf · Current Low Valuation – Market Still Catching Up to Softchoice Positioning 41 P/E Ratios 2011E

T H E S I S

Well Positioned, Long Growth Runway

Well-positioned in changing marketplace

A differentiated business model

Delivering strong results

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Going forward – powerful drivers

Page 28: PowerPoint Presentationm.softchoice.com/files/pdf/about/AGM2010presentation.pdf · Current Low Valuation – Market Still Catching Up to Softchoice Positioning 41 P/E Ratios 2011E

Attractive Financial Characteristics of Our Business Model

$0

$40

$80

$120

$160

$200

10%

12%

14%

16%

18%

20%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

Stable Trailing 12 month Gross Margin %

TTM Gross Profit

GM%

2009 2010 2011

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-$60

-$40

-$20

$0

$20

$40

$60

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

Positive Net Cash Trajectory

US$M

2009 2010 2011

Page 29: PowerPoint Presentationm.softchoice.com/files/pdf/about/AGM2010presentation.pdf · Current Low Valuation – Market Still Catching Up to Softchoice Positioning 41 P/E Ratios 2011E

Business Model Delivers Industry-Leading Performance

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Five Year Avg. Sales Growth vs. Peer Group*

Five Year Avg. ROIC vs. Peer Group**

Note: MVC Associates International. Independent Performance Analysis 2010 * Year ended 2010 ** Year ended 2009

13.0%

4.5%

Softchoice Peer Median

23.2%

4.9%

Softchoice Peer Median

Page 30: PowerPoint Presentationm.softchoice.com/files/pdf/about/AGM2010presentation.pdf · Current Low Valuation – Market Still Catching Up to Softchoice Positioning 41 P/E Ratios 2011E

2010 Highlights

• 2010 reported revenues up 17 percent

• Annual adjusted net earnings up 41 percent: – Adjusted EPS up 26% to US$0.91 per diluted share

• Strong growth across all product categories: – Microsoft up 15 percent

– Hardware solutions up 20 percent

• Year end cash position of $35.8 million

• Impact of change in accounting policy: – Reduction in revenue and cost of sales of approx. $85 million in Q4

2010 and $66 million in Q4 2009

Page 31: PowerPoint Presentationm.softchoice.com/files/pdf/about/AGM2010presentation.pdf · Current Low Valuation – Market Still Catching Up to Softchoice Positioning 41 P/E Ratios 2011E

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2010 Consolidated Statement of Earnings* (000’s of US$’s)

Actual Prior Year YOY Growth

Gross Sales $1,188,260 $1,000,248 18.8%

Reported revenue $884,014 $754,144 17.2%

Gross Profit $164,579 $142,269 15.7%

EBITDA $41,164 $35,074 17.4%

Total operating expenses $132,851 $118,051 12.5%

Operating income $31,728 $24,218 31%

Earnings before income tax $30,805 $31,840 -3.3%

Net earnings $20,242 $22,263 -9.1%

Adjusted net earnings $18,019 $12,749 41.3%

Adjusted net earnings per share (diluted)

$0.91 $0.72 26.4%

*Canadian GAAP reporting

Page 32: PowerPoint Presentationm.softchoice.com/files/pdf/about/AGM2010presentation.pdf · Current Low Valuation – Market Still Catching Up to Softchoice Positioning 41 P/E Ratios 2011E

2011 Q1 Financial Highlights

• Total revenue for the quarter up 24 percent to US$250 million

• Gross profit increased 21 percent to US$43.9 million

• Strong growth across key product segments: – Hardware solutions up 31%

– Software solutions up 45%

– Microsoft up 5%

• Adjusted net earnings grew 52 percent to $4.2 million – Adjusted EPS up 50 percent to US$0.21 per diluted share

• Quarter end cash position of $46.1 million

• Adoption of IFRS effective Jan 1, 2011

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Page 33: PowerPoint Presentationm.softchoice.com/files/pdf/about/AGM2010presentation.pdf · Current Low Valuation – Market Still Catching Up to Softchoice Positioning 41 P/E Ratios 2011E

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Q1 - 2011 Consolidated Statement of Earnings* (000’s of US$’s)

Actual Prior Year YOY Growth

Total reported revenue $249,718 $201,561 23.9%

Gross Profit $43,914 $36,448 20.5%

EBITDA $9,228 $7,229 27.7%

Total operating expenses $36,887 $31,172 18.3%

Net finance costs ($219) ($780) (71.9%)

Earnings before income taxes $7,246 $6,056 19.7%

Net earnings $5,160 $4,388 17.6%

Adjusted net earnings $4,172 $2,738 52.4%

Adjusted net earnings per share (diluted)

$0.21 $0.14 50%

*IFRS adopted Jan 1, 2011

Page 34: PowerPoint Presentationm.softchoice.com/files/pdf/about/AGM2010presentation.pdf · Current Low Valuation – Market Still Catching Up to Softchoice Positioning 41 P/E Ratios 2011E

T H E S I S

Well Positioned, Long Growth Runway

Well-positioned in changing marketplace

A differentiated business model

Delivering strong results

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Going forward – powerful drivers

Page 35: PowerPoint Presentationm.softchoice.com/files/pdf/about/AGM2010presentation.pdf · Current Low Valuation – Market Still Catching Up to Softchoice Positioning 41 P/E Ratios 2011E

Powerful Revenue and Margin Drivers

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Leverage Microsoft relationship to expand share of wallet

Build strategic engagements

Capitalize on the cloud opportunity

1

2

3

Continue strategic acquisitions 4

Page 36: PowerPoint Presentationm.softchoice.com/files/pdf/about/AGM2010presentation.pdf · Current Low Valuation – Market Still Catching Up to Softchoice Positioning 41 P/E Ratios 2011E

1. Leveraging Microsoft Relationship

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• Microsoft – a strategic enabler

• Software drives hardware

Page 37: PowerPoint Presentationm.softchoice.com/files/pdf/about/AGM2010presentation.pdf · Current Low Valuation – Market Still Catching Up to Softchoice Positioning 41 P/E Ratios 2011E

2. Leverage Our People – Build Strategic Engagements

Sales Rep Productivity

• Efficient phone-based coverage • Leveraging scale and efficiency • High volume transactions

$

$

Call Centers Assessment-led Outbound sales coverage

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15,000 customers huge opportunities

• Face to face engagement • Complex solutions • High value, high margin

Page 38: PowerPoint Presentationm.softchoice.com/files/pdf/about/AGM2010presentation.pdf · Current Low Valuation – Market Still Catching Up to Softchoice Positioning 41 P/E Ratios 2011E

3. Capitalize on the Cloud Opportunity

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Cloud Computing a Key Opportunity

Private Cloud Computing

Solutions to Enable Cloud Computing

• Assessment Services • Solution Design • Professional Services • Infrastructure • License rationalization • SaaS

Public Cloud Computing

New growth opportunities

Page 39: PowerPoint Presentationm.softchoice.com/files/pdf/about/AGM2010presentation.pdf · Current Low Valuation – Market Still Catching Up to Softchoice Positioning 41 P/E Ratios 2011E

4. Selective Acquisitions: Leverage our Scale

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A Record of Success: – Average integration time < 1 year – One set of systems to manage all lines of business

– Accretive to shareholders

Expand Customer Base Diversify Solution Set

Optimus Solutions (2008)

Software Plus (2007)

NexInnovations (2007)

3-Soft Software (2005)

Beyond.com Government Systems Group (2002)

Record of Successful Acquisitions

Page 40: PowerPoint Presentationm.softchoice.com/files/pdf/about/AGM2010presentation.pdf · Current Low Valuation – Market Still Catching Up to Softchoice Positioning 41 P/E Ratios 2011E

2010* 3-5 Year Goals

Revenue growth 17% > market growth

Recurring revenue % <30% 30% to 40%

Service revenue % < 5% > 20%

EBITDA margin % 4.7% > 6%

EPS* 26% > revenue growth

3- 5 Year Goal: EPS to Grow Faster Than Revenues

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**Adjusted for foreign exchange

*Based on 2010 net revenue reported

Page 41: PowerPoint Presentationm.softchoice.com/files/pdf/about/AGM2010presentation.pdf · Current Low Valuation – Market Still Catching Up to Softchoice Positioning 41 P/E Ratios 2011E

Current Low Valuation – Market Still Catching Up to Softchoice Positioning

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P/E Ratios 2011E Earnings*

*Source: Capital IQ May 9, 2011

SO

PCCC

SNX

NSIT

Group Avg

IM

TECD

8.1X

8.5X

8.7X

9.1X

9.1X

10.1X

10.3X

Page 42: PowerPoint Presentationm.softchoice.com/files/pdf/about/AGM2010presentation.pdf · Current Low Valuation – Market Still Catching Up to Softchoice Positioning 41 P/E Ratios 2011E

Well-positioned in changing marketplace

T H E S I S

Well Positioned, Long Growth Runway

Well-positioned in changing marketplace

A differentiated business model

Delivering strong results

Going forward – powerful drivers

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Page 43: PowerPoint Presentationm.softchoice.com/files/pdf/about/AGM2010presentation.pdf · Current Low Valuation – Market Still Catching Up to Softchoice Positioning 41 P/E Ratios 2011E

Thank You