MISSISSAUGA, ON / ACCESSWIRE / November 29, 2022 / TSXV:KUT
Quarterly Earnings Call:
8:30am EST, November 30 2022, Participant call in number is 1-800-319-4610
Quarterly Highlights:
Consolidated Highlights:
Corporate Locations Highlights:
Acquisitions
Capital Management:
Management's Comments on Q3 2022
Jeffrey Hasham, the Company's Chief Executive Officer, noted "The demand for shredding requirements continues to grow, and we grew organically as a result. This organic growth has been coupled with continued mergers and acquisitions in the shredding line of business. Our scanning business continued to perform well, with the growth versus Q3 2021 flat, due to the timing of new scanning project wins. Year-to-date revenue growth for Proscan was impressive and the pipeline of scanning projects remains strong. As in prior quarters, our e-waste business continues its growth trend. Lastly, on the revenue side, the Company continued to benefit from favorable paper prices, tonnage growth and increased baled paper volumes. From a cost perspective, our input costs continue to remain elevated, including higher fuel prices, higher truck and truck parts costs, and higher driver wages due to driver shortages. The Company also continued to face truck and truck part supply delays. In response to these rising costs, the Company implemented price increases across our corporate locations in Q3 2022. The Company also expects to realize further synergies from recently completed acquisitions, related to route densification and optimization that should help enhance future margins."
Mr. Hasham further noted "On the acquisition-front, on November 1, 2022, we completed the acquisition of the assets of Proshred Philadelphia from its franchisee. Our organic growth, commodity growth and M&A growth has translated into strong financial results, and I am pleased to report that Q3 2022 Corporate location EBITDA was $4.9 million Canadian, an increase of 33% from Q3 2021, and this, coupled with our franchise business, has driven consolidated EBITDA to $3.6 million Canadian. The result was driven by both higher EBITDA from our existing corporate store locations and our newest corporate locations. I would like to take this moment to thank all our employees, franchisees, management and board members for their continuing unwavering support and contributions during these challenging times. We have seen great results for the first nine months of 2022 and are focused on finishing 2022 off strong."
Financial Highlights:
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||
In $000's | 2022 | 2021 | Change(1) | 2022 | 2021 | Change(1) | ||||||||||||||||||
System Sales Growth - in USD | ||||||||||||||||||||||||
Total locations in the United States | 30 | 30 | 0 | % | 30 | 30 | 0 | % | ||||||||||||||||
Total system sales | $ | 18,388 | $ | 13,538 | 38 | % | $ | 53,746 | $ | 37,037 | 45 | % | ||||||||||||
% of scheduled sales | 45 | % | 48 | % | 45 | % | 49 | % | ||||||||||||||||
Consolidated Operating Growth - in CAD | ||||||||||||||||||||||||
Revenue | $ | 14,703 | $ | 9,784 | 50 | % | $ | 41,817 | $ | 25,775 | 62 | % | ||||||||||||
EBITDA | $ | 3,641 | $ | 2,857 | 27 | % | $ | 12,247 | $ | 7,533 | 63 | % | ||||||||||||
EBITDA margin | 25 | % | 29 | % | (400) bps | 29 | % | 29 | % | 0 bps | ||||||||||||||
EBITDA per weighted average share fully diluted | $ | 0.199 | $ | 0.178 | 12 | % | $ | 0.672 | $ | 0.470 | 43 | % | ||||||||||||
Operating income | $ | 2,014 | $ | 1,709 | 18 | % | $ | 7,896 | $ | 4,274 | 85 | % | ||||||||||||
Operating income margin | 14 | % | 17 | % | (300) bps | 19 | % | 17 | % | 200bps | ||||||||||||||
Operating income per weighted average share fully diluted | $ | 0.111 | $ | 0.108 | 2 | % | $ | 0.435 | $ | 0.271 | 60 | % | ||||||||||||
Government assistance not included in the above(2) | - | $ | 23 | (100) | % | - | $ | 1,341 | (100) | % | ||||||||||||||
Corporate Location Growth - in CAD | ||||||||||||||||||||||||
Revenue | $ | 14,137 | $ | 9,274 | 52 | % | $ | 40,170 | $ | 24,255 | 66 | % | ||||||||||||
EBITDA | $ | 4,915 | $ | 3,709 | 33 | % | $ | 15,560 | $ | 9,359 | 66 | % | ||||||||||||
EBITDA margin | 35 | % | 40 | % | (500) bps | 39 | % | 39 | % | 0 bps | ||||||||||||||
Operating income | $ | 3,306 | $ | 2,583 | 28 | % | $ | 11,273 | $ | 6,169 | 83 | % | ||||||||||||
Operating income margin | 23 | % | 28 | % | (500) bps | 28 | % | 25 | % | 300 bps | ||||||||||||||
Operating income less net recycling | $ | 424 | $ | 1,361 | (69) | % | $ | 3,459 | $ | 3,510 | (1) | % |
Capital Management - in CAD:
(In $000's)
As at September 30, and December 31, | 2022 | 2021 | Change (1) | |||||||||
Working capital | $ | 5,564 | $ | 3,977 | 40 | % | ||||||
Debt to total assets ratio | 0.47 | 0.49 | (4) | % | ||||||||
Normalized Fixed Charge Coverage ratio - rolling 12 months | 1.80 | 1.57 | 14 | % | ||||||||
Normalized Total Funded Debt to EBITDA ratio - rolling 12 months | 2.10 | 2.39 | (12) | % |
Revenue Growth in Q3 2022
The Company achieved 50% total revenue growth and 47% total revenue growth in constant currency during Q3 2022 versus Q3 2021 primarily due to the following:
Q3 2022 System Sales Continued to Grow
Shredding system sales in Q3 2022 grew versus Q3-2021, from both franchise and corporate location organic and acquisition related growth.
Franchise Operations
During Q3 2022, the Company supported 16 franchisees across the United States. The franchise system's high-level sales results are as follows:
For the three months ended September 30, | ||||||||||||
In USD, In $000's | 2022 | 2021 | % Change | |||||||||
Total same locations | 16 | 16 | 0 | % | ||||||||
Total same location system sales | $ | 7,791 | $ | 6,049 | 29 | % | ||||||
Total same location scheduled service sales | $ | 3,618 | $ | 2,463 | 47 | % | ||||||
Total same location unscheduled service sales | $ | 2,327 | $ | 1,914 | 22 | % | ||||||
Total same location recycling sales | $ | 1,846 | $ | 895 | 106 | % |
Corporate Locations
Total corporate location revenue and EBITDA grew by 52% and 32%, respectively, in Q3 2022 versus Q3 2021 due to the acquisitions completed over the past twelve months, organic growth from same locations, and higher paper prices. Total EBITDA margin declined over this period to 35% in Q3 2022, driven by higher operational costs, including people, fuel and truck repairs.
During Q3-2022, same corporate location shredding revenue grew 15% over Q3 2021. The Company also continued to manage its same location direct and administrative costs, resulting in same corporate location EBITDA growth of 13% compared to Q3 2021.
For the three months ended September 30, 2022 | Quarter-over-year growth | Constant currency Quarter-over-quarter growth | ||||||
Same Corporate Locations: | ||||||||
Total Revenue | 25 | % | 20 | % | ||||
EBITDA | 13 | % | 9 | % | ||||
Operating Income | 18 | % | 13 | % | ||||
Total Corporate Locations: | ||||||||
Total Revenue | 52 | % | 47 | % | ||||
EBITDA | 33 | % | 27 | % | ||||
Operating Income | 28 | % | 23 | % |
Note 1: During Q3-2022, acquisition/vendor-related consulting fees of $211 (Q3-2021 - $101) are included in the total and non-same corporate location operating costs.
Corporate Locations Trend:
2022 | 2021 | 2020 | ||||||||||||||||||||||||||||||
In $000's, in CAD | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | Q4 | ||||||||||||||||||||||||
Revenue ($) | 14,137 | 14,038 | 11,995 | 9,946 | 9,274 | 8,177 | 6,805 | 5,572 | ||||||||||||||||||||||||
Quarter over quarter % change | 1 | % | 17 | % | 21 | % | 7 | % | 13 | % | 20 | % | 22 | % | (9) | % | ||||||||||||||||
EBITDA ($) | 4,915 | 5,717 | 4,929 | 3,003 | 3,709 | 3,249 | 2,403 | 1,528 | ||||||||||||||||||||||||
Quarter over quarter % change | (14) | % | 16 | % | 64 | % | (19) | % | 14 | % | 35 | % | 57 | % | (27) | % |
Community and Social Commitment
Our locations under the PROSHRED® banner conduct numerous community shredding events. These events provide an opportunity for our clients, clients' employees, local businesses and local residents to ensure their personal and confidential materials are securely destroyed. In addition to helping to reduce identity theft, several of these events allow for donations to various not-for-profit organizations. PROSHRED® is also proud that 100% of the shredded material is recycled, as our continued goal is to foster the use of fewer trees in the production of all paper products. Future community shredding event locations can be found at our website, www.proshred.com. Our annual national Shred Cancer event was held in June of 2022 at various Proshred locations. These events are held to raise research funds for the American Institute for Cancer Research ("AICR"). It is our goal as a Company and Franchise System to support AICR in their endeavor to prevent cancer and possibly cure this disease. So far, PROSHRED® has raised over USD$205,000 for this cause. Please visit www.proshred.com/aicr for more information on this effort.
Non-IFRS Measures
There are measures included in this press release that do not have a standardized meaning under International Financial Reporting Standards ("IFRS") and therefore may not be comparable to similarly titled measures presented by other publicly traded companies. The Company includes these measures as a means of measuring financial performance of the Company.
Reconciliation of EBITDA and Operating Income to Net Income
For the three months ended September 30, | For the nine months ended September 30, | |||||||||||||||||||||||
2022 | 2021 | % Change | 2022 | 2021 | % Change | |||||||||||||||||||
$ | $ | $ | $ | |||||||||||||||||||||
EBITDA | 3,641 | 2,857 | 27 | % | 12,247 | 7,533 | 63 | % | ||||||||||||||||
Less: depreciation - tangible assets | (1,627 | ) | (1,148 | ) | 42 | % | (4,351 | ) | (3,259 | ) | 34 | % | ||||||||||||
Operating income | 2,014 | 1,709 | 18 | % | 7,896 | 4,274 | 85 | % | ||||||||||||||||
Less: interest expense | (407 | ) | (289 | ) | 41 | % | (1,193 | ) | (773 | ) | 54 | % | ||||||||||||
Add: interest income | 11 | 3 | 267 | % | 11 | 11 | - | % | ||||||||||||||||
Operating income less net interest expense | 1,618 | 1,423 | 14 | % | 6,714 | 3,512 | 91 | % | ||||||||||||||||
Less: amortization - intangible assets | (837 | ) | (679 | ) | 23 | % | (2,414 | ) | (1,944 | ) | 24 | % | ||||||||||||
Add: gain on disposition of tangible assets | 31 | - | 100 | % | 51 | - | 100 | % | ||||||||||||||||
Add/(deduct): remeasurement of contingent consideration | 154 | (253 | ) | 161 | % | 117 | (253 | ) | 146 | % | ||||||||||||||
Add: government assistance | - | 23 | (100) | % | - | 1,341 | (100) | % | ||||||||||||||||
Income before foreign exchange and income tax | 966 | 514 | 88 | % | 4,468 | 2,656 | 68 | % | ||||||||||||||||
Add/(deduct): foreign exchange gain (loss) | 3,263 | 1,025 | 218 | % | 4,046 | (114 | ) | 3,649 | % | |||||||||||||||
Deduct: Income tax expense | (342 | ) | 58 | (690) | % | (1,541 | ) | (399 | ) | 286 | % | |||||||||||||
Net income | 3,887 | 1,597 | 143 | % | 6,973 | 2,143 | 225 | % |
Financial Statements
Redishred's September 30, 2022 Financial Statements and Management's Discussion and Analysis will be available on www.sedar.com and www.redishred.com.
About Redishred Capital Corp.
Redishred Capital Corp. ("Redishred") is the owner of the PROSHRED®, PROSCAN and secure e-Cycle brands, trademarks and intellectual property in the United States. Redishred digitizes, secures, shreds and recycles confidential documents and proprietary materials for thousands of customers in the United States in all industry sectors. Redishred is a pioneer in the mobile document destruction and recycling industry and has the ISO 9001:2015 certification. It is Redishred's vision to be the ‘system of choice' in providing digital retention, secure shredding and recycling services on a global basis. Redishred Capital Corp. grants PROSHRED` and PROSCAN franchise businesses in the United States and by way of a license arrangement in the Middle East. Redishred Capital Corp. also operates fifteen corporate businesses directly. The Company's plan is to grow its business by way of both franchising and the acquisition and operation of information security businesses that generate stable and recurring cash flow through a scheduled client base, continuous paper recycling and concurrent unscheduled shredding service.
FOR FURTHER INFORMATION PLEASE CONTACT:
Redishred Capital Corp. (TSX.V - KUT)
Jeffrey Hasham, MBA, CPA, CA
Chief Executive Officer
Jeffrey.hasham@redishred.com
www.redishred.com
Phone: (416) 849-3469 Fax: (905) 812-9448
or,
Redishred Capital Corp. (TSX.V - KUT)
Harjit Brar, CPA, CA
Senior Vice President and Chief Financial Officer
harjit.brar@redishred.com
www.redishred.com
Phone: (437) 328-6639 Fax: (905) 812-9448
Note: Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
This news release contains forward looking statements that reflect the current expectations of management of Redishred and Redishred's future results, performance, achievements, prospects and opportunities. Wherever possible, words such as "may", "will", "estimate", "believe", "expect", "intend" and similar expressions have been used to identify these forward looking statements. These statements reflect current beliefs and are based on information currently available to management of Redishred. Forward looking statements necessarily involve known and unknown risks, uncertainties and other factors including risks and uncertainties relating to the COVID-19 pandemic. A number of factors, including those discussed in Redishred's 2021 Management Discussion and Analysis under "Risk Factors", could cause actual results, performance, achievements, prospects or opportunities to differ materially from the results discussed or implied in the forward looking statements. These factors should be considered carefully and a reader should not place undue reliance on the forward looking statements. There can be no assurance that the expectations of management of Redishred will prove to be correct. Readers are cautioned that such forward looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from these statements. Redishred can give no assurance that actual results will be consistent with these forward-looking statements.
SOURCE: Redishred Capital Corp.