MISSISSAUGA, ON / ACCESSWIRE / August 25, 2022 / TSXV:KUT
Quarterly Earnings Call:
8:30am EST, August 26, 2022, Participant call in number is 1-800-319-4610
Quarterly Highlights:
Consolidated Highlights:
Corporate Locations Highlights:
Acquisitions
Capital Management:
Management's Comments on Q2-2022
Jeffrey Hasham, the Company's Chief Executive Officer, noted "Even in these challenging times, we produced a strong quarter across all of our service offerings, including the Proshred, Proscan, and Secure E-Cycle brand offerings. The demand for shredding requirements continues to grow, and we experienced organic growth and growth via mergers and acquisitions in the shredding line of business. We are also continuing to see high levels of interest in customers looking to digitize their documents and as a result, have seen significant growth in our Proscan business. The Secure E-Cycle line of business allows our clients to dispose of electronic waste in a secure and green manner, and this business has not only recovered, it has grown from its pre-COVID-19 levels. In addition to the strong core service and operational results, the Company also benefited from favorable paper prices. From a cost perspective, our input costs have increased, including higher fuel commodity prices, higher truck and truck parts costs, and higher driver wages due to driver shortages. Due to these rising costs, the Company raised prices beginning in July and August across our corporate locations. To date, we have not experienced any significant customer churn from the price increases."
Mr. Hasham further noted "On the acquisition-front, we completed the acquisition of SafeGuard Document Destruction, a Florida and New Jersey-based shredding business, late in the second quarter. American Shredding, which we acquired in December of 2021, also continues to perform well and has provided us with an excellent opportunity to bale additional paper, with baled paper commanding a premium price from the market. Our organic growth, commodity growth and M&A growth has translated into strong financial results and I am pleased to report that Q2 2022 Corporate location EBITDA was $5.7 million Canadian, an increase of 76% from Q2 2021. This, coupled with our franchise business, has driven consolidated EBITDA to $4.5 million Canadian. These great results would not be possible without the hard work of the Redishred team and our franchisees; I want to take this opportunity to thank them for their continued hard work and commitment to excellence."
Financial Highlights:
Three months ended June 30, | Six months ended June 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 | $18,748 | $12,817 | 46% | $35,157 | $23,500 | 50% | |
% of scheduled sales | 43% | 48% | 44% | 49% | |||
Consolidated Operating Growth - in CAD | |||||||
Revenue | $14,597 | $8,677 | 68% | $27,114 | $15,991 | 70% | |
EBITDA | $4,540 | $2,621 | 73% | $8,606 | $4,676 | 84% | |
EBITDA margin | 31% | 30% | 100 bps | 32% | 29% | 300 bps | |
Operating income | $3,150 | $1,544 | 104% | $5,882 | $2,565 | 129% | |
Operating income margin | 22% | 18% | 400 bps | 22% | 16% | 600bps | |
Operating income per weighted average share fully diluted(3) | $0.173 | $0.098 | 77% | $0.324 | $0.163 | 99% | |
Government assistance not included in the above(2) | - | - | - | - | $1,318 | (100)% | |
Corporate Location Growth - in CAD | |||||||
Revenue | $14,038 | $8,177 | 72% | $26,033 | $14,982 | 74% | |
EBITDA | $5,717 | $3,249 | 76% | $10,646 | $5,651 | 88% | |
EBITDA margin | 41% | 40% | 100 bps | 41% | 38% | 300 bps | |
Operating income | $4,351 | $2,195 | 99% | $7,968 | $3,587 | 122% | |
Operating income margin | 31% | 27% | 400 bps | 31% | 24% | 700 bps | |
Operating income less net recycling | $1,518 | $1,324 | 15% | $3,032 | $2,150 | 41% |
Capital Management - in CAD:
(In $000's)
As at June 30, and December 31, | 2022 | 2021 |
Change (1) | |
Working capital | $5,797 | $3,977 | 46% | |
Debt to total assets ratio | 0.46 | 0.49 | (5)% | |
Normalized Fixed Charge Coverage ratio - rolling 3 months | 1.71 | 1.57 | 9% | |
Normalized Total Funded Debt to EBITDA ratio - rolling 3 months | 1.96 | 2.39 | (18)% |
Revenue Growth in Q2-2022
The Company achieved 68% total revenue growth and 65% total revenue growth in constant currency during Q2-2022 versus Q2-2021 primarily due to the following:
Q2-2022 System Sales Continued to Grow
Shredding system sales in Q2-2022 grew versus Q2-2021, from both franchise and corporate location organic and acquisition related growth.
Franchise Operations
During Q2-2022, 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 June 30, | |||
In USD, In $000's | 2022 | 2021 | % Change |
Total same locations | 16 | 17 | (6)% |
Total same location system sales | $7,877 | $5,701 | 38% |
Total same location scheduled service sales | $3,598 | $2,911 | 24% |
Total same location unscheduled service sales | $2,403 | $2,014 | 19% |
Total same location recycling sales | $1,876 | $775 | 142% |
Corporate Locations
Total corporate location revenues and EBITDA grew by 72% and 76%, respectively, in Q2-2022 versus Q2-2021 due to the acquisitions conducted over the past twelve months and the organic growth from same locations. Total EBITDA margin improved by 100 basis points over this period to 41% in Q2-2022.
During Q2-2022, same corporate location shredding revenue grew 19% over Q2-2021. The Company also continued to manage its same location direct and administrative costs, resulting in same corporate location EBITDA growth of 47% compared to Q2-2021.
For the three months ended June 30, 2022 | Quarter-over-year growth | Constant currency Quarter-over-quarter growth |
Same Corporate Locations: | ||
Total Revenue | 40% | 35% |
EBITDA | 47% | 42% |
Operating Income | 69% | 63% |
Total Corporate Locations: | ||
Total Revenue | 72% | 66% |
EBITDA | 76% | 70% |
Operating Income | 98% | 92% |
Total Corporate Locations | Same Corporate Locations | Non-same Corporate Locations | ||||||
For the three months |
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ended June 30, | 2022 | 2021 | % Change | 2022 | 2021 | % Change | 2022 | 2021 |
$ | $ |
| $ | $ |
| $ | $ | |
Revenue: | ||||||||
Shredding sales | 9,773 | 6,518 | 50% | 7,788 | 6,518 | 19% | 1,985 | - |
Electronic waste sales | 378 | 251 | 51% | 378 | 251 | 51% | - | - |
Scanning sales | 816 | 472 | 73% | 816 | 472 | 73% | - | - |
Recycling sales | 3,071 | 935 | 228% | 2,426 | 935 | 159% | 645 | - |
Total sales | 14,038 | 8,176 | 72% | 11,408 | 8,176 | 40% | 2,630 | - |
Operating costs (1) | 8,321 | 4,929 | 69% | 6,649 | 4,929 | 35% | 1,672 | - |
EBITDA | 5,717 | 3,247 | 76% | 4,759 | 3,247 | 47% | 958 | - |
% of revenue | 41% | 40% | 100 bps | 42% | 40% | 200 bps | 36% | - |
Depreciation - tangible assets | 1,366 | 1,055 | 29% | 1,061 | 1,055 | 1% | 305 | - |
Operating income | 4,351 | 2,192 | 98% | 3,698 | 2,192 | 69% | 653 | - |
% of revenue | 31% | 27% | 400bps | 32% | 27% | 500 bps | 25% | - |
Operating income less net recycling | 1,518 | 1,324 | 15% | 1,377 | 1,324 | 4% | 141 | - |
% of revenue | 14% | 18% | (400) bps | 15% | 18% | (300) bps | 7% | |
EBITDA - in USD | 4,480 | 2,633 | 70% | 3,730 | 2,633 | 42% | 750 | - |
% of revenue | 41% | 40% | 100 bps | 42% | 40% | 200 bps | 36% |
Note 1: During Q2-2022, acquisition/vendor-related consulting fees of $81 (Q2-2021 - $38) are included in the total and non-same corporate location operating costs.
2022 | 2021 | 2020 | ||||||
In $000's, in CAD | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | Q4 | Q3 |
Revenue ($) | 14,038 | 11,995 | 9,946 | 9,273 | 8,177 | 6,805 | 5,572 | 6,093 |
Quarter over quarter % change | 17% | 21% | 7% | 13% | 20% | 22% | (9)% | 10% |
EBITDA ($) | 5,717 | 4,929 | 3,003 | 3,707 | 3,249 | 2,403 | 1,528 | 2,103 |
Quarter over quarter % change | 16% | 64% | (19)% | 14% | 35% | 57% | (27)% | 21% |
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$190,000 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 June 30, | For the six months ended June 30, | |||||
2022 | 2021 | % Change | 2022 | 2021 | % Change | |
$ | $ | $ | $ | |||
EBITDA | 4,540 | 2,621 | 73% | 8,606 | 4,676 | 84% |
Less: depreciation - tangible assets | (1,390) | (1,077) | 29% | (2,724) | (2,111) | 29% |
Operating income | 3,150 | 1,544 | 104% | 5,882 | 2,565 | 129% |
Less: interest expense | (403) | (231) | 74% | (786) | (484) | 62% |
Add: interest income | - | 5 | (100)% | - | 8 | (100)% |
Operating income less net interest expense | 2,747 | 1,318 | 108% | 5,096 | 2,089 | 144% |
Less: amortization - intangible assets | (798) | (623) | 28% | (1,577) | (1,265) | 25% |
Add: gain on disposition of tangible assets | 13 | - | 100% | 20 | - | 100% |
Add/(deduct): remeasurement of contingent consideration | 2 | - | 100% | (37) | - | (100)% |
Add: government assistance | - | - | -% | - | 1,318 | (100)% |
Income before foreign exchange and income tax | 1,964 | 695 | 183% | 3,502 | 2,142 | 64% |
Add/(deduct): foreign exchange gain (loss) | 1,533 | (633) | (342)% | 783 | (1,139) | (169)% |
Deduct: Income tax expense | (684) | (472) | 45% | (1,199) | (457) | 162% |
Net income (loss) | 2,813 | (410) | 786% | 3,086 | 546 | 465% |
Financial Statements
Redishred's June 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 fourteen 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.
SORUCE: Redishred Capital Corp.