Redishred Capital Corp. ("Redishred", or the "Company") Announces Q4 and Fiscal 2022 Results, Consolidated EBITDA Grew 67% and Same Corporate Location EBITDA Grew 39% Compared to 2021

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:

• Consolidated EBITDA for 2022 was $15.3 million CAD, growing 67% versus 2021.
• The growth in consolidated EBITDA was driven by:
  • organic growth from increased bookings for existing and new customers;
  • growth from acquisitions completed in the past twelve months; and
  • higher recycling revenue, driven primarily by continued strong recycled paper prices.
• The Company generated record revenue of $57.2 million CAD, growing 58% versus 2021 (52% constant currency growth - US Dollars is the constant currency).

Corporate Locations Highlights:

• Corporate location revenue for 2022 grew 61% versus 2021 to $55.0 million CAD (55% constant currency growth).
• Corporate location EBITDA grew 64% versus 2021 to $20.3 million CAD (58% constant currency growth).
• Same corporate location EBITDA was $17.2 million CAD, growing 39% versus 2021 (34% constant currency growth).
• Same corporate location EBITDA margin improved 200 basis points to 38% in 2022.

Acquisitions

• On November 1, 2022, the Company acquired the assets of the Proshred Philadelphia business from its franchisee, for purchase consideration of $7.1 million USD paid on closing, and contingent consideration payable after one-year based on revenue, with a maximum earn-out of $0.9 million USD, and a paper earn-out payable over three-years based on the average price of paper, with a maximum earn-out of $0.8 million USD.

Capital Management:

• The Company generated $11.6 million CAD in cash from operations during 2022.
• As of December 31, 2022, the Company has $6.7 million CAD in cash, $1 million CAD available on its operating line of credit, and $2.5 million CAD available on its non-revolving re-advanceable term loan term loan.

Fourth Quarter Highlights:

Consolidated Highlights:

• Consolidated EBITDA for Q4-2022 was $3.1 million CAD, growing 85% versus Q4-2021.
• Corporate location revenue for Q4-2022 grew 49% versus Q4-2021 to $14.9 million CAD (39% constant currency growth).
• Corporate location EBITDA grew 56% versus Q4-2021 to $4.7 million CAD (44% constant currency growth).
• Same corporate location EBITDA was $4.3 million CAD, growing 43% versus Q4-2021 (32% constant currency growth).

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:

Capital Management - in CAD:

(In $000's)

1. Change expressed as a percentage or basis point ("bp").
2. During Q1-2021, the Company qualified for the second round of the United States Paycheck Protection Program ("PPP") forgivable loans which were made available to eligible US businesses that had been affected by the COVD-19 pandemic. In Q4 2021, the full amount received was forgiven. The Company also qualified for the Canadian Emergency Wage Subsidy ("CEWS") in Canada.

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:

1. the acquisitions conducted during the last 12 months
2. the organic sales growth due to:
   1. the addition of new client accounts
   2. the recovery of the economy and the easing of COVID-19 restrictions; and
3. Higher recycling revenue from increased tonnage and higher recycled paper prices.

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:

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.