MISSISSAUGA, ON / ACCESSWIRE / August 22, 2019 / RediShred Capital Corp. (TSXV: KUT)
Quarterly Earnings Call:
9:00am EST, August 23, 2019, Participant call in number is 1-800-319-4610
Second Quarter Highlights:
Consolidated Highlights:
- Consolidated EBITDA for Q2-2019 was $1.7M CAD, growing 77% over Q2-2018.
- Consolidated operating income for Q2-2019 was $1M CAD, growing 51% over Q2-2018.
- Consolidated operating income margin for Q2-2019 remained flat over Q2-2018 at 19%.
- The Company generated revenue of $5.6M CAD during Q2-2019, growing 55% over Q2-2018.
Corporate Locations Highlights:
- Corporate locations revenue in Q2-2019 grew 65% over Q2-2018 to $4.8M CAD.
- Corporate locations EBITDA in Q2-2019 grew 45% over Q2-2018 to $1.7M CAD.
- Same corporate location EBITDA in Q2-2019 declined 9% over Q2-2018 due to the decline in commodity paper prices and increased costs related to driver shortages and truck repairs.
- The decline in commodity paper prices led to a decline in recycling revenue of $159,000 CAD for same corporate locations which accounted for 15% of Q2-2018 EBITDA.
Capital Management:
- During Q2-2019, the Company secured an additional senior credit facility of $9.5M USD and advanced $4.47M USD ($6M CAD). The advance on the term loan bears interest at a fixed rate of 3.50% with an amortization period of 84 months.
- The Company also revised the terms of its existing credit facilities with its lender during Q2-2019. The $3M non-revolving term loan interest rate was reduced from prime rate plus 2.50% to prime rate plus 1.00% and the operating line of credit interest rate was reduced from prime rate plus 1.25% to prime rate plus 1.00%.
- Subsequent to Q2-2019, on July 4, 2019, the Company completed a private placement of 11,842,000 common shares at a price of $0.95 per common share for total gross proceeds of $11,249,900. The net proceeds of the private placement will be used to fund future growth initiatives including both acquisitions and organic growth, and for general corporate purposes. Broker commissions will be paid in connection with the offerings of approximately $683,000, as well as legal fees of approximately $107,000.
Management’s Comments on the Q2 2019 Results
Jeffrey Hasham, the Company’s Chief Executive Officer, noted “The Company’s second quarter was strong, led by the ProShred Kansas and Safe Shred Acquisitions conducted in the last 9 months. These two locations have performed as expected. The entire system saw scheduled system sales on a same location basis grow by 18%. This metric is important as scheduled system sales is a recurring and sustainable cash flow stream for franchisees and Corporate locations. Unfortunately, paper prices continued to decline and the average paper price in the Proshred system in Q2-2019 was 21% lower than in Q2-2018. This has impacted same location EBITDA. Management will continue to focus on growing scheduled sales and maximizing route efficiencies to counter the decline in paper prices. To start the third quarter, the Company completed an equity raise of $11.25M Canadian Dollars to fund future acquisitions and for general business purposes.
In closing, we would like to highlight Redishred’s Shred Cancer events that were held on June 1, 2019. These events raise much needed funds for the American Institute for Cancer Research. We are proud to inform that we have raised over $150,000 to date for this cause. Our gratitude goes out to our franchisees and employees who contribute to this very worthy cause.”
Financial Highlights:
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For the three months ended June 30 |
For the six months ended June 30 |
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(in 000’s except as noted) |
2019 |
2018(1) |
% change |
2019 |
2018(1) |
% change |
|
|
System Sales Performance - in USD |
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|
Total locations in the United States |
30 |
29 |
3% |
30 |
29 |
3% |
|
|
System sales |
$11,664 |
$10,192 |
14% |
$22,890 |
$19,198 |
19% |
|
|
Percentage scheduled |
48% |
45% |
3% |
47% |
46% |
1% |
|
|
Consolidated Operating Performance - in CDN |
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|
Revenue |
$5,570 |
$3,584 |
55% |
$10,773 |
$6,738 |
60% |
|
|
EBITDA(2) |
$1,691 |
$956 |
77% |
$3,311 |
$1,755 |
89% |
|
|
EBITDA margin |
30% |
27% |
3% |
31% |
26% |
5% |
|
|
Operating Income(3) |
$1,034 |
$684 |
51% |
$2,067 |
$1,235 |
67% |
|
|
Operating income margin |
19% |
19% |
0% |
19% |
18% |
1% |
|
|
Operating Income per share fully diluted |
$0.015 |
$0.012 |
25% |
$0.030 |
$0.025 |
20% |
|
|
Corporate Locations Performance - in CDN |
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|
Revenue |
$4,833 |
$2,924 |
65% |
$9,341 |
$5,431 |
72% |
|
|
EBITDA(2) |
$1,704 |
$1,179 |
45% |
$3,427 |
$2,202 |
56% |
|
|
EBITDA margin |
35% |
40% |
(5)% |
37% |
41% |
(4)% |
|
|
Operating income(3) |
$1,091 |
$912 |
20% |
$2,266 |
$1,694 |
34% |
|
|
Operating income margin |
23% |
31% |
(8)% |
24% |
31% |
(7)% |
|
(1)With the adoption of IFRS 15 for the year ended December 31, 2018, the Company has restated the comparative information in accordance with this standard.
(2)EBITDA is determined as revenue less operating costs.
(3)Operating income is determined as revenue less operating costs less depreciation related to tangible assets. Operating income includes transition costs associated with acquired operations.
Capital Management - in CAD
|
As at June 30 and December 31,
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2019 | 2018 |
%
change
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|
|
||||||||||||
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Working capital (In $000s)
|
$ | 2,928 | $ | 7,288 | (60 | )% | ||||||
|
Debt to total assets ratio
|
0.45 | 0.29 | (55 | )% | ||||||||
|
Normalized Fixed Charge Coverage ratio - rolling 12 months
|
2.51 | 1.94 | 29 | % | ||||||||
|
Normalized Total Funded Debt to EBITDA ratio - rolling 12 months
|
2.55 | 1.69 | (51 | )% | ||||||||
Stronger System Sales driving both Royalty and Corporate Location Revenue
System sales increased due to the Company’s continued focus on providing recurring scheduled service to small and medium sized enterprise clients. In addition, the Company continued to invest in marketing initiatives designed to capture one-time unscheduled revenue.
During the first half of 2019 Redishred’s System Sales growth over the first half of 2018 was as follows:
|
Total System Sales increased by 19% (Same Location 12%) |
|
|
By Service Type: |
By Location Type: |
|
Scheduled (recurring) increased by 21% (Same Locations 15%) |
Franchise locations system sales increased by 17% (Same Locations 17%) |
|
Unscheduled increased by 21% (Same Locations 10%) |
Corporate locations system sales increased by 72% (Same Locations 9%) |
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Recycling increased by 13% (Same Locations 7%) |
|
Franchise Operations
The Company’s roots are founded in franchising and at June 30, 2019, the Company supported 21 franchisees through the United States. The franchise system continued to perform well with the following high sales results highlighted:
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For the 6 months ended June 30 | |||||||||||
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In USD, In $000s
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2019 | 2018 | % Change | |||||||||
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|
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Total same store locations
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21 | 21 | 0 | % | ||||||||
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|
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Total same store system sales
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$ | 15,300 | $ | 13,523 | 13 | % | ||||||
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|
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Total same store scheduled service sales
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$ | 7,314 | $ | 6,278 | 17 | % | ||||||
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Total same store unscheduled service sales
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$ | 5,081 | $ | 4,633 | 10 | % | ||||||
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Total same store recycling sales
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$ | 2,904 | $ | 2,613 | 11 | % | ||||||
Corporate Operations
As of June 30, 2019, the Company operates nine shredding locations in Syracuse, Albany, Milwaukee, New York City, Charlotte, Miami, Northern Virginia, North New Jersey and Kansas. These locations represent the Company’s corporately owned locations. The commodity paper prices declined by 29% for same corporate locations during Q2-2019 over Q2-2018 which led to the decline in recycling revenue, EBITDA, operating income and margins.
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(In CDN, In 000s)
|
Total Corporate Locations | Same Corporate Locations | Non-same Corporate Locations | |||||||||||||||||||||||||||||
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For the 3 months ended June 30,
|
2019 | 2018 | % Change | 2019 | 2018 | % Change | 2019 | 2018 | ||||||||||||||||||||||||
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Revenue:
|
$ | |||||||||||||||||||||||||||||||
|
Shredding service
|
$ | 4,157 | $ | 2,353 | 77 | % | $ | 2,601 | $ | 2,353 | 11 | % | $ | 1,556 | - | |||||||||||||||||
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Recycling
|
$ | 677 | $ | 571 | 19 | % | $ | 412 | $ | 571 | (28 | )% | $ | 265 | - | |||||||||||||||||
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Total revenue
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$ | 4,834 | $ | 2,924 | 65 | % | $ | 3,013 | $ | 2,924 | 3 | % | $ | 1,821 | - | |||||||||||||||||
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|
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Operating costs
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$ | 3,130 | $ | 1,745 | 79 | % | $ | 1,936 | $ | 1,745 | 11 | % | $ | 1,194 | - | |||||||||||||||||
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EBITDA
|
$ | 1,704 | $ | 1,179 | 45 | % | $ | 1,077 | $ | 1,179 | (9 | )% | $ | 627 | - | |||||||||||||||||
|
% of revenue
|
35 | % | 40 | % | (5 | )% | 36 | % | 40 | % | (4 | )% | 34 | % | - | |||||||||||||||||
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|
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Depreciation - tangible assets(1)
|
$ | 613 | $ | 267 | 130 | % | $ | 357 | $ | 267 | 34 | % | $ | 256 | - | |||||||||||||||||
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|
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Corporate operating income
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$ | 1,091 | $ | 912 | 20 | % | $ | 720 | $ | 912 | (21 | )% | $ | 371 | - | |||||||||||||||||
|
% of revenue
|
23 | % | 31 | % | (8 | )% | 24 | % | 31 | % | (7 | )% | 20 | % | - | |||||||||||||||||
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|
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Same corporate location operating income margins declined year over year due to the following:
- The Q2-2019 results include the IFRS 16 adjustments which were not applied retrospectively.
- decline in commodity paper prices causing a decline of 30% (or $132,000) in recycling revenue;
- driver shortages and turnover causing upward pressure on driver wages and increased overtime;
- increased truck repair costs and truck downtime.
Corporate Locations Trend:
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|
2019(1)
|
2018
|
2017
|
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| Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | Q4 | Q3 | |||||||||||||||||||||||||
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Revenue ($)
|
4,833,148 | 4,507,462 | 3,607,617 | 2,977,170 | 2,924,082 | 2,506,453 | 2,280,150 | 2,349,342 | ||||||||||||||||||||||||
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Quarter over quarter % change
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8 | % | 25 | % | 21 | % | 2 | % | 17 | % | 10 | % | (3 | )% | (9 | )% | ||||||||||||||||
|
EBITDA ($)
|
1,566,740 | 1,602,650 | 1,169,290 | 1,038,069 | 1,178,593 | 1,023,026 | 768,539 | 952,118 | ||||||||||||||||||||||||
|
Quarter over quarter % change
|
(2 | )% | 37 | % | 12 | % | (12 | )% | 15 | % | 33 | % | (19 | )% | (2 | )% | ||||||||||||||||
- The Q2-2019 and Q1-2019 amounts exclude the IFRS 16 adjustments.
Community and Social Commitment
Our locations under the PROSHRED® banner conduct many 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. On June 1, 2019, PROSHRED® held its 6th annual Shred Cancer event at most of its locations, raising money for the American Institute for Cancer Research (“AICR”). It is our goal as a Company and Franchise System to support the AICR in their endeavor to prevent cancer and possibly cure this disease. So far, PROSHRED® has raised in excess of $150,000 for this cause. Please visit www.proshred.com/aicr for more information on this effort.
Financial Statements
Redishred’s June 30, 2019 Financial Statements, Notes and Management’s Discussion and Analysis will be available at www.sedar.com and www.redishred.com.
About Redishred
Redishred Capital Corp. is the owner of the PROSHRED® trademarks and intellectual property in the United States. PROSHRED® shreds and recycles confidential documents and proprietary materials for thousands of customers in the United States in all industry sectors. PROSHRED® is a pioneer in the mobile document destruction and recycling industry and has the ISO 9001:2015 certification. It is PROSHRED®’s vision to be the ‘system of choice’ and provide shredding and recycling services on a global basis. Redishred Capital Corp. grants PROSHRED® franchise businesses in the United States and by way of license arrangement in the Middle East. Redishred Capital Corp. also operates nine corporate shredding businesses directly. The Company’s plan is to grow its business by way of both franchising and the acquisition and operation of document destruction 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
[email protected]
www.redishred.com
Phone: (416) 849-3469 Fax: (905) 812-9448
or,
Redishred Capital Corp. (TSX.V - KUT)
Kasia Pawluk, CPA, CA
Chief Financial Officer
[email protected]
www.redishred.com
Phone: (416) 204-0076 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 and uncertainties. A number of factors, including those discussed in the 2018 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.