from Redishred Capital Corp. (isin : CA7574891098)
Redishred Capital Corp. ("Redishred", or the "Company") Announces Strong Q2 2023 Results
MISSISSAUGA, ON / ACCESSWIRE / August 24, 2023 /
Quarterly Earnings Call:
8:30am EST, August 25, 2023, Participant call in number is 1-800-319-4610
Quarterly Highlights:
Consolidated Highlights:
- The Company generated revenue of $16.8 million CAD, growing $2.2 million CAD, or 15% versus Q2 2022.
- Shredding sales for Q2 2023 were $12.5 million CAD, growing 28% versus Q2 2022.
- Consolidated EBITDA for Q2 2023 was $4.5 million CAD, decreasing 1% versus Q2 2022.
- Consolidated EBITDA excluding the impact of net recycling revenue was $2.2 million CAD for Q2 2023, growing 28% versus Q2 2022.
Corporate Locations Highlights:
- Corporate location revenue for Q2 2023 grew 15% versus Q2 2022 to $16.2 million CAD (10% constant currency growth - US Dollars is the constant currency).
- Corporate location EBITDA grew 8% versus Q2 2022 to $6.2 million CAD (3% constant currency growth).
- Same corporate location EBITDA was $5.4 million CAD, decreasing 5% versus Q2 2022 (10% constant currency decrease), driven by lower net recycling revenue due to lower commodity paper prices.
Capital Management:
- The Company generated $2.7 million CAD in cash from operations during Q2 2023.
- As at June 30, 2023, the Company has $5.4 million CAD in cash, $1 million CAD available on its operating line of credit, and $4.8 million CAD available on its non-revolving re-advanceable term loan.
Management's Comments on Q2-2023
Jeffrey Hasham, the Company's Chief Executive Officer, noted "We are pleased with our results in the second quarter of 2023. We continue to see strong demand for our services, including our core recurring shredding service offering, which has helped drive our organic revenue growth. From a paper market perspective, paper prices have started to decline, impacting our recycling revenue. We had anticipated this, and as a result, are well positioned to deal with any softness in the paper market. Looking at our Proscan business, we have started seeing an uptick in revenue when compared to the beginning of 2023 and our pipeline of scanning projects remains strong.
We have continued to focus on route efficiencies, and this was very evident by the strong EBITDA less net recycling revenue growth of 28%. We are seeing some signs of easing from a cost front, particularly in driver wage inflation and fuel pricing. From a pricing perspective, beginning in May 2023, we started implementing price increases across our corporate locations, with all price increases now fully implemented. We also expect to realize further synergies from recently completed acquisitions related to route densification and optimization that should help enhance future margins.
For the quarter, I am pleased to report that Q2 2023 Corporate location EBITDA was $6.2 million Canadian, an increase of 8% from Q2 2022. This, coupled with our franchise business, has driven consolidated EBITDA to $4.5 million Canadian for Q2 2023. These results reflect the hard work and commitment of our employees, franchisees, management and board members, and I would like to personally thank each of them for their efforts and contributions."
For the three months ended June 30, | 2023 | 2022 | Change(1) | ||||
System Sales Performance - in USD, in $000's | |||||||
Total locations in the United States | 30 | 30 | -% | ||||
Total system sales | $ | 19,238 | $ | 18,748 | 3% | ||
% of scheduled sales | 47% | 43% | |||||
| Consolidated Operating Growth - in CAD, in $000's | |||||||
Revenue | $ | 16,751 | $ | 14,597 | 15% | ||
EBITDA | $ | 4,488 | $ | 4,540 | (1)% | ||
EBITDA margin | 27% | 31% | (400) bps | ||||
EBITDA less net recycling | $ | 2,188 | $ | 1,708 | 28% | ||
EBITDA less net recycling margin | 15 | 15% | - bps | ||||
Operating income | $ | 2,501 | $ | 3,150 | (21)% | ||
Operating income margin | 15% | 22 | (700) bps | ||||
Free cash flow | $ | (100 | $ | 2,099 | (105)% | ||
Operating income per weighted average share fully diluted | $ | 0.14 | $ | 0.17 | (21)% | ||
EBITDA per weighted average share fully diluted | 0.25 | 0.25 | - | ||||
EBITDA less net recycling per weighted average share fully diluted | 0.12 | 0.09 | 28 | ||||
Free cash flow per weighted average share fully diluted | $ | (0.01 | $ | 0.12 | (108)% | ||
| Corporate Location Performance - in CAD, in $000's | |||||||
Revenue | $ | 16,184 | $ | 14,037 | 15% | ||
EBITDA | $ | 6,200 | $ | 5,717 | 8% | ||
EBITDA margin | 38% | 41% | (300) bps | ||||
Operating income | $ | 4,259 | $ | 4,351 | (2)% | ||
Operating income margin | 26% | 31% | (500) bps | ||||
Operating income less net recycling | $ | 1,958 | $ | 1,519 | 29% | ||
Capital Management - in CAD:
(In $000's)
As at June 30, and December 31, | 2023 | 2022 | Change (1) | ||||
Working capital(2) | $ | 831 | $ | 8 | 10,288% | ||
Debt to total assets ratio | 0.50 | 0.52 | (4)% | ||||
Normalized Fixed Charge Coverage ratio - rolling 12 months | 1.29 | 1.82 | (29)% | ||||
Normalized Total Funded Debt to EBITDA ratio - rolling 12 months | 2.05 | 2.11 | (3)% | ||||
- Change expressed as a percentage or basis point ("bp").
- Working Capital represents the excess of the Company's current assets over its current liabilities.
Revenue Growth in Q2-2023
The Company achieved 15% total revenue growth and 8% total revenue growth in constant currency during Q2 2023 versus Q2 2022 primarily due to acquisitions conducted during the last 12 months, organic sales growth from new customers and price increases.
Corporate Locations
Total corporate location revenue and EBITDA grew by 15% and 8%, respectively, in Q2 2023 versus Q2 2022 due to the acquisitions completed over the past twelve months, organic growth from same locations, and price increases.
Same corporate location revenue grew 2% and EBITDA decreased 5%, in Q2 2023 verses Q2 2022, driven by lower recycling revenue due to lower commodity paper prices.
| Total Corporate Locations | Same Corporate Locations | Non-same Corporate Locations | ||||||
| For the three months ended | ||||||||
| June 30, | 2023 | 2022 | % Change | 2023 | 2022 | % Change | 2023 | 2022 |
| $ | $ | $ | $ | $ | $ | |||
| Revenue: | ||||||||
| Shredding sales | 12,530 | 9,773 | 28% | 11,123 | 9,773 | 14% | 1,407 | - |
| Secure e-Cycle electronic waste sales | 332 | 378 | (12)% | 332 | 378 | (12)% | - | - |
| Scanning sales | 713 | 816 | (13)% | 713 | 816 | (13)% | - | - |
| Recycling sales | 2,608 | 3,070 | (15)% | 2,207 | 3,070 | (28)% | 401 | - |
| Total sales | 16,184 | 14,037 | 15% | 14,376 | 14,037 | 2% | 1,808 | - |
| Operating Costs(1) | 9,984 | 8,320 | 20% | 8,956 | 8,320 | 8% | 1,028 | - |
| EBITDA | 6,200 | 5,717 | 8% | 5,420 | 5,717 | (5)% | 780 | - |
| % of revenue | 38% | 41% | (300) bps | 38% | 41% | (300) bps | 43% | - |
| Depreciation - tangible assets | 1,941 | 1,366 | 42% | 1,687 | 1,366 | 24% | 254 | - |
| Operating income | 4,259 | 4,351 | (2)% | 3,733 | 4,351 | (14)% | 526 | - |
| % of revenue | 26% | 31% | -500 bps | 26% | 31% | (500) bps | 29% | - |
| Operating income less recycling | 1,958 | 1,519 | 29% | 1,816 | 1,519 | 20% | 142 | - |
| % of revenue excluding recycling | 14% | 14% | -bps | 15% | 14% | 100bps | 10% | |
| EBITDA - in USD | 4,617 | 4,480 | 3% | 4,037 | 4,480 | (10)% | 580 | - |
| % of revenue | 37% | 41% | (400) bps | 38% | 41% | (300) bps | 43% | |
Note 1: During Q2-2023, acquisition/vendor-related consulting fees of $37 (Q2-2022 - $81) are included in the total and non-same corporate location operating costs.
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 on our website, www.proshred.com. Our annual national Shred Cancer event was held in June of 2023 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$212,000 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.
- Total System Sales are sales generated by franchisees, licensees and corporately operated locations. The system sales generated by franchisees and licensees drive the Company's royalties. The system sales generated by corporate locations are included in the Company's revenue.
- Same Location are indicators of performance of corporately operated locations that have been in the system for equivalent periods in both the current period and the comparative period.
- Consolidated EBITDA is defined as earnings before interest, taxes, depreciation and amortization. Consolidated EBITDA also excludes government assistance, re-measurements of contingent consideration, foreign exchange gains and losses, and gains and losses on disposal of tangible assets. A reconciliation between net income and consolidated EBITDA is provided below.
- Consolidated EBITDA less Net Recycling is defined as the consolidated EBITDA excluding the impact of corporate location recycling sales, net of paper baling costs. A reconciliation between net income and consolidated EBITDA less net recycling is provided below
- Consolidated Operating Income is defined as revenues less all operating expenses, including depreciation on tangible assets. Amortization for intangible assets has not been included in this calculation. A reconciliation between net income and consolidated operating income is provided below.
- Consolidated Free Cash Flow is defined as cash provided by operating activities net of capital expenditures. The calculation of Consolidated Free Cash Flow that begins with cash provided by operating activities is provided below.
- Capital Expenditures is defined as the purchase of tangible and intangible assets, net of proceeds received from their disposal.
- Corporate Location EBITDA is defined as earnings for corporately operated locations before interest, taxes, depreciation and amortization and also excludes items identified under the definition of Consolidated EBITDA above.
- Corporate Location Operating Income is the income generated by corporately operated locations. The operating income generated is inclusive of depreciation on tangible assets, including trucks, right-of-use-assets and secure collection containers. It does not include amortization related to intangibles assets and interest expense.
- Corporate Location Operating Income less Net Recycling is the corporate location operating income excluding the impact of corporate location recycling sales, net of paper baling costs.
- Margin is the percentage of revenue that has turned into EBITDA or Operating Income. Margin is defined as EBITDA or operating income divided by revenue.
- Constant currency is a measure of growth before foreign currency translation impacts. It is defined as the current period results in CAD currency using the foreign exchange rate in the equivalent prior year period. This allows for period over period comparisons of business performance excluding the impact of currency fluctuations.
Reconciliation of EBITDA and Operating Income to Net Income