MISSISSAUGA, ON / ACCESSWIRE / April 21, 2023 / TSXV:KUT
Quarterly Earnings Call:
8:30am EST, April 24, 2023, Participant call in number is 1-800-319-4610
Annual Highlights:
Consolidated Highlights:
Corporate Locations Highlights:
Acquisitions
Capital Management:
Fourth Quarter Highlights:
Consolidated Highlights:
Management's Comments on Q4-2022
Jeffrey Hasham, the Company's Chief Executive Officer, noted "We are pleased with our Q4 2022 and full-year 2022 results. We continue to see strong demand for our services, including our core shredding service offering, driving impressive organic growth. We completed the acquisition of our Proshred Philadelphia franchise in Q4 2022 and this acquisition, coupled with the other acquisitions that we have completed in the past twelve months, has allowed us to further scale and grow our business.
Revenue growth for Proscan for full-year 2022 was impressive and the pipeline of scanning projects remains strong. Scanning services for larger customers, including for government customers, is in part dictated by timing and approval of customer budgets, which impacts when the Company performs these services. Hence, the full-year results are more reflective of the performance of the Proscan business. As in prior quarters, our e-waste business continues its growth trend. From a recycling revenue perspective, the Company continued to benefit from favorable paper prices, tonnage growth and increased baled paper volumes.
From a cost perspective, we have started to see easing, particularly in driver wage inflation and fuel pricing. In response to rising costs, the Company implemented price increases across the corporate locations in Q3 2022 and will explore further price increases in 2023. The Company also expects to realize further synergies from recently completed acquisitions, related to route densification and optimization that should help enhance future margins.
Our organic growth, commodity price growth and M&A activities have translated into strong financial results, and I am pleased to report that Q4 2022 Corporate location EBITDA was $4.7 million Canadian, an increase of 56% from Q4 2021. This, coupled with our franchise business, has driven consolidated EBITDA to $3.1 million Canadian for Q4 2022. I would like to take this opportunity to thank all our employees, franchisees, management and board members for their efforts and contributions. Our performance in 2022 was strong, thanks to their efforts, and puts us in a strong position to execute as we move into 2023."
Financial Highlights:
Three months ended December 31, | Year ended December 31, | ||||||||||||||||||||
In $000's, except per share amounts | 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 | $ 18,219 | $ 14,155 | 29 % | $ 71,764 | $ 51,193 | 40 % | |||||||||||||||
% of scheduled sales | 50 % | 47 % | 48 % | 48 % | |||||||||||||||||
Consolidated Operating Growth - in CAD | |||||||||||||||||||||
Revenue | $ 15,409 | $ 10,424 | 48 % | $ 57,226 | $ 36,199 | 58 % | |||||||||||||||
EBITDA | $ 3,071 | $ 1,658 | 85 % | $ 15,318 | $ 9,191 | 67 % | |||||||||||||||
EBITDA margin | 20 % | 16 % | 400 bps | 27 % | 25 % | 200 bps | |||||||||||||||
EBITDA per weighted average share fully diluted | $ 0.17 | $ 0.10 | 70 % | $ 0.84 | $ 0.58 | 45 % | |||||||||||||||
Operating income | $ 1,203 | $ 413 | 191 % | $ 9,099 | $ 4,687 | 94 % | |||||||||||||||
Operating income margin | 8 % | 4 % | 400 bps | 16 % | 13 % | 300bps | |||||||||||||||
Operating income per weighted average share fully diluted | $ 0.07 | $ 0.03 | 133 % | $ 0.50 | $ 0.29 | 72 % | |||||||||||||||
Government assistance not included in the above(2) | - | - | - | - | $ 1,348 | (100 )% | |||||||||||||||
Corporate Location Growth - in CAD | |||||||||||||||||||||
Revenue | $ 14,850 | $ 9,946 | 49 % | $ 55,020 | $ 34,201 | 61 % | |||||||||||||||
EBITDA | $ 4,697 | $ 3,003 | 56 % | $ 20,257 | $ 12,362 | 64 % | |||||||||||||||
EBITDA margin | 32 % | 30 % | 200 bps | 37 % | 36 % | 100 bps | |||||||||||||||
Operating income | $ 2,866 | $ 1,780 | 61 % | $ 14,139 | $ 7,949 | 78 % | |||||||||||||||
Operating income margin | 19 % | 18 % | 100 bps | 26 % | 23 % | 300 bps |
Capital Management - in CAD:
(In $000's)
As at December 31, | 2022 | 2021 | Change (1) | |||
| ||||||
Working capital | $8 | $3,977 | (100)% | |||
Debt to total assets ratio | 0.52 | 0.49 | 6% | |||
Normalized Fixed Charge Coverage ratio - rolling 12 months | 1.82 | 1.57 | 16% | |||
Normalized Total Funded Debt to EBITDA ratio - rolling 12 months | 2.11 | 2.39 | (12)% |
Revenue Growth in Q4-2022
The Company achieved 48% total revenue growth and 42% total revenue growth in constant currency during Q4-2022 versus Q4-2021 primarily due to the following:
Q4 2022 System Sales Continued to Grow
Shredding system sales in Q4 2022 grew versus Q4-2021, from both franchise and corporate location organic and acquisition related growth.
Franchise Operations
During Q4 2022, the Company supported 15 franchisees across the United States. The franchise system's high-level sales results are as follows:
For the three months ended December 31, | |||||||||
In USD, In $000's | 2022 |
|
| 2021 | % Change | ||||
Total same locations | 15 | 16 | (6)% | ||||||
Total same location system sales | $ | 6,419 | $ | 4,996 | 28% | ||||
Total same location scheduled service sales | $ | 3,127 | $ | 2,652 | 18% | ||||
Total same location unscheduled service sales | $ | 1,822 | $ | 1,454 | 25% | ||||
Total same location recycling sales | $ | 1,470 | $ | 890 | 65% |
Corporate Locations
Total corporate location revenue and EBITDA grew by 49% and 56%, respectively, in Q4-2022 versus Q4-2021 due to the acquisitions completed over the past twelve months, organic growth from same locations, and higher paper prices. Total EBITDA margin increased over this period to 32% in Q4-2022 compared to 30% in Q4-2021.
During Q4-2022, same corporate location shredding revenue and EBITDA grew 24% and 43%, respectively, over Q4-2021.
For the three months ended December 31, 2022 | Quarter-over-quarter growth | Constant currency quarter-over-quarter growth | |||
Same Corporate Locations: | |||||
Total Sales | 24 | % | 15 | % | |
EBITDA | 43 | % | 32 | % | |
Operating Income | 57 | % | 45 | % | |
Total Corporate Locations: | |||||
Total Sales | 49 | % | 39 | % | |
EBITDA | 56 | % | 44 | % | |
Operating Income | 61 | % | 47 | % | |
Total Corporate Locations | Same Corporate Locations | Non-same Corporate Locations | ||||||
For the 3 months | ||||||||
ended December 31, | 2022 | 2021 | % Change | 2022 | 2021 | % Change | 2022 | 2021 |
$ | $ | $ | $ | $ | $ | |||
Revenue: | ||||||||
Shredding sales | 10,958 | 7,491 | 46 | 9,074 | 7,491 | 21% | 1,884 | - |
Secure e-Cycle electronic waste sales | 372 | 251 | 48% | 372 | 251 | 48% | - | - |
Scanning sales | 360 | 644 | (44)% | 360 | 644 | (44)% | - | - |
Recycling sales | 3,160 | 1,560 | 103% | 2,544 | 1,560 | 63% | 616 | - |
Total sales | 14,850 | 9,946 | 49% | 12,350 | 9,946 | 24% | 2,500 | - |
Operating costs (1) | 10,153 | 6,943 | 46% | 8,059 | 6,943 | 16% | 2,094 | - |
EBITDA | 4,697 | 3,003 | 56% | 4,291 | 3,003 | 43% | 406 | - |
% of revenue | 32% | 30% | 200 bps | 35% | 30% | 500 bps | 16% | |
Depreciation - tangible assets | 1,831 | 1,223 | 50% | 1,500 | 1,223 | 23% | 331 | - |
Operating income | 2,866 | 1,780 | 61% | 2,791 | 1,780 | 57% | 75 | - |
% of revenue | 19% | 18% | 100 bps | 23% | 18% | 500 bps | 3% | |
EBITDA - in USD | 3,438 | 2,380 | 44% | 3,142 | 2,380 | 32% | 296 | - |
% of revenue | 31% | 30% | 100 bps | 34% | 30% | 400 bps | 16% |
Note 1: During the three months ended December 31, 2022, acquisition/vendor-related consulting fees of $236 (three months ended December 31, 2021- $167) are included in the total and non-same operating costs.
Corporate Locations Trend:
2022 | 2021 | |||||||||||||||||||||||
In $000's, in CAD | Q4 | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | ||||||||||||||||
Revenue ($) | 14,850 | 14,137 | 14,038 | 11,995 | 9,946 | 9,273 | 8,177 | 6,805 | ||||||||||||||||
Quarter over quarter % change | 5% | 1% | 17% | 21% | 7% | 13% | 20% | 22% | ||||||||||||||||
EBITDA ($) | 4,697 | 4,915 | 5,717 | 4,928 | 3,003 | 3,707 | 3,249 | 2,403 | ||||||||||||||||
Quarter over quarter % change | (4)% | (14)% | 16% | 64% | (19)% | 14% | 35% | 57% |
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 | For the year ended | |||||
2022 | 2021 | % Change | 2022 | 2021 | % Change | |
$ | $ | $ | $ | |||
EBITDA | 3,071 | 1,658 | 85% | 15,318 | 9,191 | 67% |
Less: depreciation - tangible assets | (1,868) | (1,245) | 50% | (6,219) | (4,504) | 38% |
Operating income | 1,203 | 413 | 191% | 9,099 | 4,687 | 94% |
Less: interest expense | (711) | (463) | 54% | (1,904) | (1,236) | 54% |
Add: interest income | 36 | 2 | 1694% | 47 | 13 | 262% |
Operating income (loss) less net interest expense | 528 | (48) | 1197% | 7,242 | 3,464 | 109% |
Less: amortization - intangible assets | (959) | (764) | 26% | (3,373) | (2,708) | 25% |
Add: other income | 95 | 56 | 70% | 95 | 56 | 70% |
Add: gain on disposition of tangible assets | 107 | 386 | (72)% | 158 | 394 | (60)% |
Add/(deduct): remeasurement of contingent consideration | 5 | 26 | (81)% | 122 | (227) | 154% |
Add: government assistance | - | 7 | (100)% | - | 1,348 | (100)% |
(Loss) income before foreign exchange and income taxes | (224) | (338) | 35% | 4,243 | 2,327 | 82% |
Add/(deduct): foreign exchange gain (loss) | (664) | (85) | 678% | 3,382 | (200) | 1791% |
Less: income tax expense | (211) | (370) | (43)% | (1,752) | (769) | 128% |
Net (loss) income | (1,099) | (793) | 39% | 5,874 | 1,358 | 333% |
Financial Statements
Redishred's December 31, 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 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 2022 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.